California

COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2018 Important dates in Palmdale and Antelope Valley History

From left: Captain John C. Frémont, ‘pathfinder of the Rocky Mountains’, passes through the west end of the Antelope Valley; Pronghorn antelope, for which the Valley is named; Capt. Chuck Yeager is the first man to break the sound barrier; Mule team used to construct the L.A. Aqueduct in the western Antelope Valley.

1772 Captain Pedro Fages is the first white quickly becomes one of the biggest alfalfa 1940 Angeles Forest Highway opens. man to cross through the Antelope Valley. producers in California. 1947 Captain Charles Yeager, flying over the 1776 Father Garces comes through the west 1905-13 The Los Angeles-Inyo Aqueduct is Valley from Muroc Air Force Base in a X1 Bell end of the Valley on his way to the Mission of constructed across the Antelope Valley. aircraft, is the first man to break the sound San Gabriel. 1905-20s The years of big jackrabbit drives barrier. 1827 Jedediah Smith and party travels in the Antelope Valley. These drives became 1952 The U.S. Government buys Palmdale through the west end of the Antelope Valley necessary when the rabbits become so thick Airport, renaming it Air Force Plant 42. and Willow Springs. that they destroy many crops. 1953 Lockheed opens a plant in Palmdale, 1844 John C. Frémont and party comes 1910 The Corum family homesteads the and the shift from agriculture to aerospace is through the west end of the Antelope Valley. west side of Rogers Dry Lake. A small town, completed. Muroc (Corum spelled backwards), develops. 1857 Lieutenant Edward Beale and his 1956 Palmdale High School opens on famous camel cavalry travels through the At the present time, this area is known as September 8. Edwards. south end of the Antelope Valley heading for 1962 On August 24, 1962, Palmdale is Fort Tejon. 1912 Antelope Valley High School is incorporated, making it the first city in the founded. 1876 The Southern Pacific Railroad Antelope Valley. Palmdale’s first mayor is completes its line through the Antelope 1914 Pacific Light & Power Company brings Larry Chimbole, and the four councilmen Valley. the first electric power lines into the Antelope elected are Richard Linaker, Marlin Gilbreath, Valley. The company is later sold to the Domenic Massari and Lester Nichols. The Antelope Valley loses 1882-85 present Edison International. 30,000 head of antelope, almost half of 1967 On October 3, William J. “Pete” Knight the population for which it was named. 1915 The first Fair is held in Lancaster. attains the highest speed ever — 4,520 mph Unusually heavy snows in the mountains Palmdale’s first paper, The Palmdale Post, (Mach 6.7) — in the X-15A-2, a fixed-wing and on the valley floor drives the antelope is published. (The first weekly paper in aircraft. toward their normal feeding grounds in the the Antelope Valley is the Lancaster News, 1971 The California State Aqueduct is eastern part of the Valley, but they would not published in 1885.) completed. cross the railroad tracks and many starve to 1921 Mint Canyon Highway is paved and its 1974 Antelope Valley Freeway is completed. death. name changed to Sierra Highway. 1977 Palmdale City Library opens, the first 1886 Palmenthal is founded by Swiss and 1924 Palmdale Lake is reconstructed as building constructed by the City of Palmdale. German families. Harold Reservoir. 1980 Palmdale Cultural Center opens. Palmdale Lake , known as Alpine 1896 1924 Littlerock Dam is completed. 1981 The first space shuttle, Columbia Reservoir, is constructed. 1929 Classes start at Antelope Valley Junior STS-1, lands at Edwards Air Force Base 1899 Palmenthal’s name changes to College. on April 14. It is the world’s first reusable Palmdale. 1933 The U.S. Air Force builds a base spacecraft. 1904 William Barton is the first to use a at Muroc Dry Lake. In 1949, the name is 1987 The Palmdale schoolhouse, the oldest gasoline engine to pump water from his well. changed from Muroc Air Force Base to still-standing building from the original Other farmers quickly adopt this method of Edwards Air Force Base, in honor of Glen Palmenthal settlement, finds a permanent pumping. Its use marks the beginning of the Edwards, a young captain who lost his life home at McAdam Park. It is officially local alfalfa industry, as the Antelope Valley flying an experimental aircraft. dedicated in 1988.

COMPREHENSIVE

ANNUAL FINANCIAL REPORT

CITY OF PALMDALE, CALIFORNIA

For the Fiscal Year Ended

June 30, 2018

Prepared By

Karen Johnston Finance Manager

Keith Kang Assistant Finance Manager

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TABLE OF CONTENTS Page No. I. INTRODUCTORY SECTION

Letter of Transmittal i GFOA Certificate of Achievement for Excellence in Financial Reporting xii Organization Chart - City of Palmdale xiii Elected and Administrative Officers xiv Location Map xv

II. FINANCIAL SECTION

Independent Auditors' Report 1

Managements' Discussion and Analysis 4

Basic Financial Statements

Government-Wide Financial Statements 17 Statement of Net Position 18 Statement of Activities 19

Fund Financial Statements

Governmental Fund Financial Statements 21 Balance Sheet 22 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 23 Statement of Revenues, Expenditures and Changes in Fund Balance 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25

Budgetary Comparison Statements - General and Major Special Revenue Funds 27 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund 28 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - HA-Housing Asset Fund Special Revenue Fund 29 Budget and Actual - HA-Mobile Home Parks Special Revenue Fund 30 Budget and Actual - Street Light Assessment District Special Revenue Fund 31

Fiduciary Fund Financial Statement 33 Statement of Fiduciary Net Position - Fiduciary Funds 34 Statement of Changes in Fiduciary Net Position 35

Notes to the Basic Financial Statements 37

REQUIRED SUPPLEMENTARY INFORMATION 103

Schedule of Changes in Net Pension Liability and Related Ratios-Public Employees Retirement System 104 Schedules of Contributions-Public Employees Retirement System 105 Schedule of Changes in Net OPEB Liability and Related Ratios 106 Schedule of Investment Returns for OPEB 107 City of Palmdale Comprehensive Annual Financial Report For the Year Ended June 30, 2018

TABLE OF CONTENTS Page No.

SUPPLEMENTAL SECTION

Non-Major Governmental Funds 109

Fund Descriptions 109

Combining Statements - Fund Financial Statements Combining Balance Sheet 112 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 116

Budgetary Comparison Schedules 121 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Special Revenue Funds: Air Quality Improvement 122 Community Development Block Grant 123 Drainage 124 Drainage Benefit Assessment Funds 125 Federal Funds 126 Federal Home Program 127 Federal Jobs Program 128 Fire Facilities Impact Special Revenue Fund 129 Gas Tax 130 Housing Authority 131 Landscape Maintenance 132 Local Transportation - Article 3 133 Local Transportation - Article 8 134 Measure R 135 Measure M 136 Miscellaneous Grants/Developer Contributions 137 Park Assessments 138 Park Development 139 Proposition A 140 Proposition C 141 Public Facilities Fund 142 Public Safety 143 South Antelope Valley Emergency Services 144 Sewer Maintenance Assessment District 145 Sewer Upgrade 146 State Grants 147 Traffic Impact 148 Housing Facilities 149 Palmdale Community Foundation 150 Water Park 151 Debt Service Funds: Palmdale Civic Authority 152 Palmdale Financing Authority 153 CFD/Assessment Districts 154 City of Palmdale Comprehensive Annual Financial Report For the Year Ended June 30, 2018

TABLE OF CONTENTS Page No.

SUPPLEMENTAL SECTION, CONTINUED

Statement of Fiduciary Net position and Assets and Liabilities 155 Statement of Fiduciary Assets and Liabilities Assessment and Community Facilities Districts Agency Fund 156 Combining Statement of Fiduciary Net Position Retiree Health Premium Trust Funds 157 Statement of Changes in Net position and Assets and Liabilities 159 Statement of Changes in Assets and Liabilities Assessment and Community Facilities Districts Agency Fund 160 Statement of Changes in Fiduciary Net Position Retiree Health Premium Trust Funds 161

III. STATISTICAL SECTION

Introduction 163

Financial Trends Net Position by Component 165 Changes in Net Position 166 Fund Balances, Governmental Funds 168 Changes in Fund Balances, Governmental Funds 170

Revenue Capacity General Governmental Tax Revenues by Source 172 Assessed Value and Estimated Actual Value of Taxable Property 173 Direct and Overlapping Property Tax Rates 174 Principal Property Tax Payers 175 City Property Tax Levies and Collections 176

Debt Capacity Ratios of Outstanding Debt by Type 177 Ratio of General Bonded Debt Outstanding 178 Direct and Overlapping Governmental Activities Debt 179 Legal Debt Margin Information 180 Project Area 1 & 1A Pledged - Revenue Coverage 181 Project Area 2A Pledged - Revenue Coverage 182 Project Area 2A (20% Set Aside) Pledged Revenue Coverage 183

Demographic and Economic Information Demographic and Economic Statistics 184 Principal Employers - Antelope Valley 185

Operating Information Full-time Equivalent City Government Employees by Function/Program 186 Operating Indicators by Function/Program 187 Capital Asset Statistics by Function/Program 190

IV. OTHER INFORMATION Successor Agency (Private Purpose Trust Fund) Debt Information 191

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Introductory

Section

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

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November 16, 2018

Honorable Mayor, Members of the City Council, and Citizens of the City of Palmdale:

Accepted practice recommends that all local governments publish a complete set of financial statements presented in conformance with generally accepted accounting principles (GAAP) and audited by a firm of licensed certified public accountants in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Palmdale for the fiscal year ended June 30, 2018.

This report consists of management's representations concerning the finances of the City of Palmdale. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Palmdale has established a comprehensive internal control framework that is designed to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Palmdale's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Palmdale’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City of Palmdale's financial statements have been audited by Vavrinek, Trine, Day, & Co., LLP, a firm of licensed certified public accountants. The goal of the independent audit was to opine on whether the financial statements of the City of Palmdale for the fiscal year ended June 30, 2018, are free of material misstatement. The independent audit involved examination on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation.

i Based upon the audit, the independent auditor concluded that there was a reasonable basis for rendering an unmodified opinion that the City of Palmdale's basic financial statements for the fiscal year ended June 30, 2018, are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the City of Palmdale was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Palmdale's separately issued Single Audit Report.

GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Palmdale’s MD&A can be found immediately following the report of the independent auditors.

Palmdale History

Today's Palmdale has its roots in two small, early communities: Harold (Alpine Station) and Palmenthal. Harold was a natural location for a community because it was at the crossroads of the two major routes on the Valley floor, the Southern Pacific Railroad tracks and Fort Tejon Road (now Barrel Springs Road). In the late 1890s Harold was reduced to a few residents when the railroad decided to build a larger station for its booster engines. Booster engines were needed to get the train over the San Gabriel Mountains, and they needed to be started on flat land. Harold was not flat, and so the new station was built a short distance north of Harold, at what is now central Palmdale.

Palmenthal came to be in 1886 when between 50 and 60 families of Swiss and German descent were moving westward from the Midwest to California. As the settlers came to the Antelope Valley and saw our Joshua trees, they mistook them for palm trees. The families settled about three miles southeast of the present Civic Center and called their new town Palmenthal. The 1890’s were a decade of boom and bust spurred on by the lure of cheap land and good living. In 1899 the community relocated to the heart of present-day Palmdale, and changed its name to Palmdale. So this is how Palmdale came to be. Palmenthal and Harold both came to be abandoned, and both settlements relocated to the center of the new city of Palmdale by the new Southern Pacific railroad station.

The Primary Government

The City of Palmdale was incorporated on August 24, 1962 and became a charter City in November 2009. The City is located 60 miles north of Los Angeles and is situated in the high desert at an elevation of 2,600 feet with an average mean temperature of 72 degrees Fahrenheit. Palmdale is an upper-middle class community, with a median household income of $52,801 in 2016, which is comparable to Los Angeles at $54,432. Palmdale residents enjoy a comfortable hometown feel with a strong family orientation, excellent education system and abundant opportunities in a safe environment.

ii There are eighty-eight cities in Los Angeles County with a total population of 10 million. Palmdale is the sixth largest and one of the fastest growing cities in the county. The City currently occupies a land area of 104 square miles and serves a population of 158,905. The City is empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing council.

The City of Palmdale is a Charter City governed under the council/manager form of local government. The five-member City Council consists of an elected at large Mayor who serves a two-year term. Beginning with the November 2016 General Municipal Election, the Councilmembers are elected by four (4) geographic districts. Registered Voters voted for one (1) Councilmember to represent their district. For the November 2016 General Municipal Election ONLY, City Council Districts will have staggered terms with Districts One and Two serving a four-year term and Districts three and four serving a two-year term. After the November 2016 election, all Council District seats will have four (4) year terms. The Mayor Pro Tem is selected from among the City Council members. The City Manager serves at the pleasure of the City Council and administers the City's affairs and carries out policies established by the City Council. The City Council is responsible for passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the council, for overseeing the day-to- day operations of the government, and for appointing various department heads. The City provides the following municipal services:

Municipal Services

Building Services Economic Development Engineering Finance Library Parks, Recreation, and Cultural Human Resources Planning and Zoning Public Safety Public Works

The annual budget serves as the foundation for the City of Palmdale's financial planning and control. All departments of the City of Palmdale are required to submit requests for appropriation to the City Manager on or before March 31 each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the council for review prior to May 31. The council is required to hold public hearings on the proposed budget and to adopt a final budget by no later than July 1. The appropriated budget is by fund and department. Department heads may make transfers of appropriations within a department.

The accompanying Comprehensive Annual Financial Report includes the financial activities of the City of Palmdale, the primary government, and its component units, which are the Palmdale Civic Authority, the Palmdale Financing Authority, the Housing Authority of the City of Palmdale, the Palmdale Community Foundation and the Industrial Development Authority of the City of Palmdale. Financial information for the City and these component units is accounted for in the accompanying financial statements in accordance with principles defining the governmental reporting entity adopted by the Governmental Accounting Standards Board.

iii The City Council members, in separate session, serve as the governing board of the Palmdale Civic Authority, the Palmdale Financing Authority, the Housing Authority, the Palmdale Community Foundation and the Industrial Development Authority and, in addition, the financial benefit/burden relationship, these entities are presented on a blended basis.

The Palmdale Civic Authority (the Authority) was originally created under a joint powers agreement between the City of Palmdale (City) and the former Community Redevelopment Agency of the City of Palmdale (Agency) in May 1976, for the purpose of financing public improvements in the City. The Authority is financially accountable to the City and, accordingly, is a component unit of the City although it is a separate legal entity. Assets of the Authority, after providing for all debts and obligations, are to be transferred to the City upon final payment of the loans.

The Palmdale Financing Authority (the Authority) was created under a joint powers agreement between the City of Palmdale (City) and the Housing Authority of the City of Palmdale (Agency) on September 26, 2012 for the purpose of financing public improvements in the City. The Authority is financially accountable to the City and, accordingly, is a component unit of the City although it is a separate legal entity. Assets of the Authority, after providing for all debts and obligations, are to be transferred to the City upon final payment of the loans.

Housing Authority of the City of Palmdale (the Housing Authority) was established in April 1997, pursuant to provisions of the State of California Housing Authorities Law. The Housing Authority is subject to the financial accountability of the City Council of the City of Palmdale, California (the City) and, accordingly is a component unit of the City although it is a separate legal entity. The Housing Authority's primary purpose is to address the shortage of multi-family housing in the City of Palmdale with respect to which long-term affordability for low-income persons is ensured as the result of recorded agreements or covenants. The Housing Authority elected to become the Housing Successor as a result of the dissolution of the former Community Redevelopment Agency and on February 1, 2012, certain housing assets were transferred to the City’s Successor Agency Housing Authority - Housing Asset Fund as the City has control of those assets, which may be used in accordance with the affordable housing provisions of California’s Redevelopment Law, as amended by Health and Safety Code Section 34176.1.

Industrial Development Authority of the City of Palmdale (the IDA) was established in February 1995, and is authorized to issue bonds pursuant to the provisions of the California Industrial Financing Act (constituting Sections 91500 et seq. of the California Government Code, the "Law") for the purpose of providing financing for the acquisition, construction, and equipping of industrial facilities.

Palmdale Community Foundation (the Foundation) was established on January 1998, and is a non-profit organization, is organized under the California Nonprofit Public Benefit Corporation Law for public purposes. The specific purpose the Foundation is to receive contributions and donations from the public and to use such contributions and donations to support charitable, literary, and educational activities authorized under Section 501(c)(3) of the Internal Revenue Code, including the support of programs, projects, and activities sponsored by the City of Palmdale. City staff acts as the governing body of the Foundation by serving as its board members. The Foundation exists solely for the enhancement of the City of Palmdale programs. The City of Palmdale is the sole corporate member of the Foundation.

iv Economic Development, Job Creation and Housing

The City’s Strategic Plan reflects the concerns the community of Palmdale has with respect to a number of economic development, job creation and housing development actions. The City’s primary revenue source for funding these activities was our former Community Redevelopment Agency; however, this was eliminated by the State of California in a desperate attempt to divert local money to Sacramento. In one fell swoop, the City lost its most effective and flexible tool for reinvesting in the community and providing assistance in creating new jobs, affordable housing and new amenities for its residents.

Factors Affecting Financial Condition

Local Economy

The City of Palmdale has everything a community would want. With more than 300 days of sunshine a year, our bright blue skies and gorgeous summer evenings, great restaurants, shopping, parks amenities, golf courses and more makes Palmdale a great place to call home.

Aerospace has been and will continue to be an important element of the Antelope Valley economy for the foreseeable future. Our valley has a proud history of building advanced aircraft and technology for the aerospace industry. This industry has helped us attract numerous other businesses into the area. One of the most impactful aerospace projects in many years was the recent award of the B-21 contract to Northrop Grumman. This $95 billion dollar contract, along with airship and experimental supersonic jet contracts awarded to Lockheed are turning eyes toward Palmdale as a growth area in Los Angeles County. Advances in healthcare with USC/Keck Medical partnering with Palmdale Hospital, and proposed expansion of the filming zone into the Antelope Valley all bode well for a more diverse economy going forward and enhance economic stability for many years to come.

As businesses expand their operations, the difficulty of finding top talent is a challenge as employers are increasingly struggling to find workers who possess the necessary skills to fill job openings. Therefore, a diverse, well-trained and qualified workforce is a key resource that allows an economy to grow. To help meet the regional workforce demand for hundreds of trained aerospace manufacturing workers, the City, continues to partner with Northrop Grumman, Antelope Valley College, Los Angeles County Workforce Development Aging and Community Services and JVS SoCal to expand and offer customized manufacturing vocational training through the aircraft fabrication and assembly (AFAB) Program. The customized manufacturing vocational training program is offered on campus at Antelope Valley College and the Palmdale Airport terminal utilizing a curriculum developed by Northrop Grumman and approved by the Department of Education. The result is a career pathway that starts with 16 weeks of intensive training and culminates in a guaranteed round of job interviews from which Northrop Grumman has first pick of graduates to fabricate and assemble large aircraft. A number of other aerospace companies including Lockheed Martin also interview candidates who have completed the training. To date, the program has graduated 329 students and has had a 95% overall placement rate.

The future arrival of the California High Speed Rail system, which includes a multi-modal rail station located near the Palmdale Transportation Center, will transform the way residents live, work and recreate in the City of Palmdale. High speed rail service to the San Fernando Valley and City of Los Angeles will provide greatly needed travel options for commuters. High speed rail, together with expanded Metrolink and bus service, Amtrak and Greyhound service, and

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improvements to key arterials and freeways will help reduce congestion and air pollution and provide better travel options for residents.

Planning for the arrival of high speed rail in the City of Palmdale began over 20 years ago and continues in anticipation of its arrival. Two planning studies that focus on transit oriented development (i.e. walkable communities near rail and transit services) and multi-modal connectivity to the future high speed rail/multi-modal station have recently been completed. A third study, which is funded by the California High Speed Rail Authority, is also currently underway and focuses on developing station design concepts, economic development strategies and policy and regulatory change near and adjacent to the future multi-modal station. The study will be completed in FY 2018-19.

In addition, regional plans include connecting the nation’s only privately owned, operated and maintained express passenger rail system to the California High Speed Rail system in Palmdale, via the High Desert Corridor route from Victorville, with the line terminating in Las Vegas. As a result, Palmdale residents will ultimately be able to travel to Las Vegas, and potentially beyond, via the Brightline High Speed Train system. Brightline recently acquired the project with rights to develop a federally approved corridor and the first phase of the corridor that will connect Las Vegas and Victorville is expected to begin construction in 2019. Initial service for the first phase is expected to begin in 2022 and is tentatively scheduled to connect to Palmdale in 2025.

In 2016, Los Angeles County voters approved Metro LA’s “Measure M,” a half-cent sales tax measure to raise funds for transportation infrastructure development. Within the first five years, Palmdale will receive approximately $8 million dollars that will be used on projects to improve local and regional traffic flow, safety and ease of use. Palmdale will continue to receive funds via Measure M and will use these funds to enhance transportation infrastructure to meet the community’s needs.

The City has been successful in securing over $128.5 million in grants and special funding to meet the challenges of growth and providing adequate capital improvements for the citizens of Palmdale. The challenge going forward is to ensure that funding is obtained to continue to maintain these capital assets. Grants and special funding may not always be available. To be sustainable over the long term, we must be sure to keep this issue under close scrutiny and plan for future maintenance needs.

The drought may be over and water restrictions lifted but the City of Palmdale will continue its commitment to improve the water supply for the future use of Palmdale residents. The City will commence construction of the Upper Amargosa Creek Recharge Project in 2018-19, which will greatly enhance water banking possibilities Valley-wide and improve the water supply picture. The City, through the Palmdale Water Recycling Authority, will complete design of a regional water recycling line from McAdam Park to Massari Park this year which will allow the Authority to apply for grants to greatly expand the use of recycled water and enhance the water supply picture. The City will begin a new program this year of banking 567 acre-feet of water in the AVEK Water Bank until the Upper Amargosa Creek Recharge Project is complete.

The City of Palmdale’s purchase of 17,777 street lights from Southern California Edison was complete on March 28, 2018. The purchase of the street lights will enable the City to provide better, more reliable streetlight service and provide future technologies and uses for the streetlights that will benefit City residents. Additionally, owning the street lights will provide the opportunity to upgrade the lights to light-emitting diode (LED) fixtures and improve the streetlight system, offering reduced energy and maintenance costs.

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The City of Palmdale continued its progress in developing the Palmdale Power Plant this past year. The City transferred its assets in the project to Summit Power LLC in February 2015. These assets consist of all permits, contracts, and other governmental approvals in the project. Summit Power is now the owner of the project. All permits needed to allow construction of the Project have been obtained. Construction is anticipated to begin in 2019 and the Project should be operational by mid-2022. The development of the project will add high paying jobs to the area, provide millions of dollars in infrastructure to the City, and provide reliable electricity that will stabilize, support, and supplement renewable energy production in the area. Once financed and built, the project will also provide the City with a significant amount of revenue. This revenue will amount to millions of dollars over and above what the City initially invested in developing the project. As the final approvals have not been received for the Power Plant, no revenues have been included in the Financial Statements.

The City has been working with grant writers and local community members to develop the vacated Old County Courthouse building once housed by NASA and the Aero Institute. One vision being pursued is an interactive children’s museum blending Science, Technology, Engineering, and the Arts with an aerospace focus. This concept will require extensive community partnerships, grant funding and involvement of the education and aerospace communities.

The City finalized a lease agreement in May 2018 with the United States Air Force to preserve the existing Palmdale air terminal, parking area and access road for use by AV College to conduct the AFAB workforce training program until another suitable training facility is constructed near the college on Palmdale Boulevard. In exchange, the Air Force has agreed to develop a memorandum of understanding between the City and the Air Force to allocate property adjacent to the existing runway Sierra and taxiway being utilized by NASA for the SOFIA project to be leased and developed as the future Palmdale Airport terminal location. The facility and taxiways at the existing air terminal location were found to be unsuitable for current commercial passenger and cargo traffic. The new location will be in a much more suitable area, adjacent to the LAWA property, but will require construction of a TSA-approved secure passenger and cargo facility, parking, lighting, security, access road improvements, taxiways, utilities, etc. This will be a multi-million dollar development project, likely requiring private investment as well as public funding. Interest by the defense contractors in accessing both cargo and passenger service for out-of-state employees to serve the many project under development and planned at Plant 42 is driving the project.

The City’s significant revenues are experiencing a steady growth with sales tax revenues increasing and the City of Palmdale’s housing market continues to rebound. Sales tax revenue reflected an increase of 3.7 percent growth in fiscal year 2017-18 as compared to fiscal year 2016-17 and a 7.5 percent increase of Property Tax revenues in fiscal year 2017-18 as compared to fiscal year 2016-17. A portion of the property tax increase is the result of property values being restored to the previously Proposition 13 reviewed and reduced values. Proposition 8 allowed for the assessor’s office to reduce property values during the economic recession and decline of property values. We anticipate continued recovery of Proposition 8 reductions through fiscal year 2018-19.

Unemployment rates for the City are reported by the California Employment Development Department, at 6.6% in July 2018. The City’s unemployment rate of 6.6% as compared to 5.1% for the County, 4.2% for the State, and 3.9% for the U.S.

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The housing market, which is a good indicator of the local real estate market, continues to increase modestly. Inventory constrains and affordability is the main contributor to increases in home prices in the City of Palmdale. The median sale price of a single family home in Palmdale as of 1st Quarter of 2018 was $305,000, a 10.9 percent increase from 1st Quarter of 2017. The median sale price increase over 2017 is still 17.6 percent below the pre-recession peak median price of $370,000 from 2006. There continues to be an increased need for new market-rate housing, including apartments and condominiums, driven in part by significant hiring by local aerospace corporations Northrop Grumman and Lockheed Martin. Several housing projects that went dormant during the recession have resurfaced and have begun the entitlement process. Several new mixed use and multi-family projects are in the conceptual and review stages. Completion of the Courson Arts Colony’s 161 units of affordable housing and construction of owner-occupied Veteran housing will address some of the housing availability needed in the affordable market.

The City has maintained a very strong available general fund reserve, supported by the City’s strong management team and financial policies and practices and have still maintained a Long- term Issuer Credit Rating of Aa3 from Moody’s Investor Services and an increase to AA- from A+ from Standard and Poor’s Rating Services.

Long Term Financial Planning

As growth in the City’s economically sensitive revenues remains on pace for a solid fiscal year 2017-18, the City’s focus is to maintain the long-term health of the organization in order to deliver needed services to our residents. We also continue to preserve the City’s ability to respond to external financial challenges such as continued increases in our law enforcement contract, retirement contributions, and healthcare costs, as well as federal and state funding decreases.

Management continues to align operating revenues with operating expenditures and this was successfully achieved with the fiscal year 2018-19 budget adoption while showing a surplus. A use of reserves is being expected to be needed in fiscal year 2018-19 as the result of one-time expenditures. Management’s long term goal is to commit general fund funding to build up reserves for purposes, such as one time expenditures and for expenditures considered to be most volatile and hard to forecast. Management has proactively taken steps to manage the future volatility of the City’s pension cost by establishing a Pension Stabilization Trust Fund in fiscal year 2017-18 and a $1.0 million or approximately 5.9 percent of Persable salaries contribution was made to pre-fund the pension obligations. Management plans to contribute annually approximately 3 percent of Persable salaries that will be used to continue to pre-fund the pension obligations. The City forecasts a stable General Fund over the next few years while contributing annually to reserves set aside for future contingent liability requirements, capital replacement requirements, computer technology replacements, infrastructure improvement requirements, and an economic sustainability fund for future downturns in the economy. At the end of the fiscal year 2017-18 the unrestricted fund balance (the unassigned component of fund balance) in the General Fund is 55.8 percent of total general fund revenues and 61.7 percent of total general fund expenditures.

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Strategic Plan – “Success Through Sustainability”

Our new Strategic Plan, adopted in 2013, which builds on the previous plan, is now firmly in place. The Strategic Plan, as illustrated by the “Wheel of Success” shown in Exhibit A, outlines the City’s three main goals — building a sustainable community, a sustainable economy and a sustainable organization — that represent our key focus and helps us define and determine the strategies and actions necessary to build a thriving and sustainable community. The outer ring of the “Wheel of Success” outlines twelve key strategic objectives that support these three goals of the Strategic Plan.

Each of the twelve key objectives has a business plan that is being developed, outlining the steps to achieve our core goals. In addition, each business plan will have performance measures to assist in charting our progress toward reaching that key objective. Sustainability is a necessity in order to achieve the goals and objectives, with partnerships at every level linking all the elements of the Strategic Plan.

Exhibit A: Wheel of Success

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Twelve key objectives of the Strategic Plan and their Comprehensive Business Plans will advance our efforts to provide focus and strategic direction for our organization, and serve as a blueprint for creating economic, organizational and community sustainability.

I. A Sustainable Community  Recreation and Culture  Neighborhood Preservation and Revitalization  Community Engagement  Safety

II. A Sustainable Economy  Infrastructure  Diversification – Industry Clusters  Retail Revitalization  Regulatory Approach

III. A Sustainable Organization  Quality Services  Employee Development  Financial Health  Internal and External Communication

The Strategic Plan, in conjunction with the detailed Business Plans, will continue to serve as a roadmap for our organization and the framework for our important programming and budgetary decisions.

Processes involving strategic planning will allow the City the opportunity to not only reflect on five decades of growth and success, but also to revisit our focus for the future. Creating a successful future in Palmdale will depend on the continued implementation of the Strategic Plan, as well as making necessary adjustments that will sustain us in the years and decades ahead.

Award and Acknowledgements

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Palmdale for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2017. This was the twenty eighth consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. I believe that our current CAFR continues to meet the Certificate of Achievement program’s requirements and I am submitting it to the GFOA to determine its eligibility for another certificate.

The City also received the Excellence in Operational Budgeting Award from California Society of Municipal Finance Officers (CSMFO) and the Distinguished Budget Presentation Award from Government Finance Officers Association (GFOA) for the fiscal year 2017-2018 Budget.

x The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Administrative Services-Finance Division. I would like to express my appreciation to all members of the depaftment who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor, City Council members, and the City Manager for their support for maintaining the highest standards of professionalism in the management of the City of Palmdale's finances.

Respectfully submitted,

Karen Johnston, C.P.A Finance Manager/Cify Treasurer

XI

xii City of Palmdale Organizational Chart xiii

City Officials

Year Ended June 30, 2018

City Council James C. Ledford, Jr. Mayor Steven D. Hofbauer Mayor Pro Tem Austin Bishop Councilmember Laura Bettencourt Councilmember Juan Carrillo Councilmember

Administration and Department Heads

City Manager James Purtee Assistant City Manager John Murphy City Attorney Wm. Matthew Ditzhazy Director of Administrative Services Anne Ambrose Director of Economic & Community Development Mark Oyler Director of Recreation and Culture Keri Smith Director of Neighborhood Services Michael Miller Director of Public Works Chuck Heffernan

xiv LOCATION MAP

Map of the Antelope Valley

The beautiful Antelope Valley, situated at the northern tip of Los Angeles County, is bounded by the Tehachapi Mountains in Kern County to the north, the Angeles National Forest and Santa Clarita Valley to the west, the San Gabriel Mountains to the south, and a long expanse of high desert stretching all the way to Victorville, in San Bernardino County, to the east. The City of Palmdale, encompassing 104 square miles, sits at the southern end of the Antelope Valley at an elevation of 2,600 feet

xv

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Financial

Section

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

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INDEPENDENT AUDITORS' REPORT

To the Honorable City Council of The City of Palmdale City of Palmdale, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Palmdale, California (City), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

1

10681 Foothill Blvd., Suite 300, Rancho Cucamonga, CA 91730 P 909.466.4410 F 909.466.4431 W vtdcpa.com Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2018, and the respective changes in financial position, and the respective budgetary comparison for the General Fund and each of the major special revenue funds for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1 to the financial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, effective July 1, 2017. Our opinions are not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of changes in the City’s net pension liability and related ratios, schedule of contributions, schedules of changes in net OPEB liability and related ratios, and schedule of investment returns on pages 4 through 15 and 104 through 107, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, statistical section, and other information are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements and schedules is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.

The introductory, statistical section, and other information have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

2

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2018, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Rancho Cucamonga, California November 16, 2018

3 City of Palmdale

Management’s Discussion and Analysis

As management of the City of Palmdale, we offer readers of the City of Palmdale's financial statements this narrative overview and analysis of the financial activities of the City of Palmdale for the fiscal year ended June 30, 2018. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i through xv of this report.

Financial Highlights

• The assets and deferred outflows of resources of the City of Palmdale exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $845,342,559 (net position). Of this amount $43,372,746 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors.

• The City’s total net position decreased in the current year by $115,132 as compared to prior year. Details on current year changes are discussed on page 8 and restatement discussed at Note 23.

• As of the close of the current fiscal year, the City of Palmdale's governmental funds reported combined ending fund balances of $228,902,128, an increase of $22,863,086 in comparison with the prior year. Details are discussed on page 11.

• The City of Palmdale's total debt increased by $7,380,564 or 8.7 percent, during the current fiscal year. The increase is primarily due to the financing of the streetlight acquisition during fiscal year 2017-18 for $11,397,102, and additional debt added from on bill financing of LED Retrofitting at City facilities. The increase was offset by regular scheduled annual debt payments and the reduction of Self Insurance Liability Claims. Details are discussed in Note (11) and Note (12).

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City of Palmdale's basic financial statements. The City of Palmdale's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements.

Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Palmdale's finances, in a manner similar to a private- sector business.

The statement of net position presents information on all of the City of Palmdale's assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Palmdale is improving or deteriorating.

The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

4 City of Palmdale

Management’s Discussion and Analysis

Both of the government-wide financial statements distinguish functions of the City of Palmdale that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Palmdale include general government, public safety, public services, community development, cultural and recreational, health and welfare, and interest on debt. The City does not have any business-type activities.

The government-wide financial statements include not only the City of Palmdale as the primary government, but also a legally separate Palmdale Civic Authority, the Palmdale Financing Authority, the Housing Authority of the City of Palmdale, the Palmdale Community Foundation, and the Industrial Development Authority of the City of Palmdale. Financial information for these component units is reported on a blended basis. The government-wide financial statements can be found on pages 18-19 of this report.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Palmdale, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All of the funds of the City of Palmdale can be divided into two categories: governmental funds and fiduciary funds.

Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, the readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances, provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The governmental fund statements can be found on pages 21-25.

The City of Palmdale maintains 37 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Housing Authority-Housing Asset Fund Special Revenue Fund, the Housing Authority-Mobile Home Park Fund Special Revenue Fund, and the Street Lighting Assessment District Fund Special Revenue Fund all of which are considered to be major funds. Data from the remaining 33 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements on pages 109-119.

The City of Palmdale adopts an annual appropriated budget for its General Fund, its Housing Authority - Housing Asset Fund - Special Revenue Fund, its Housing Authority Mobile Home Park – Special Revenue Fund, and its Street Lighting Assessment District – Special Revenue Fund. A budgetary comparison statement has been provided for each of these funds to demonstrate compliance with their respective budgets. The budgetary comparison statements can be found on pages 27-31.

5 City of Palmdale

Management’s Discussion and Analysis

Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide statement because the resources of those funds are not available to support the City of Palmdale's own programs. The basic fiduciary fund financial statement can be found on pages 33-35 of this report.

Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 37-102 of this report.

Government-Wide Financial Analysis

As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Palmdale, assets exceeded liabilities by $845,342,559 as of June 30, 2018.

The City of Palmdale’s net investment in capital assets reflects a balance of $643,077,802. Investment in capital assets is defined as land, buildings, machinery and equipment, infrastructure, and construction in progress, net of accumulated depreciation, and less any related debt or deferred outflows of resources used to acquire these assets that is still outstanding. The City of Palmdale uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Palmdale's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

In addition, the City has reported the City’s net pension liability and related deferred inflows and outflows in the City’s Financial Statements. Additional detailed information can be found in Note (15) of the Notes to the Financial Statements. A separate section is reported for deferred outflows of resources that represent a consumption of net position that applies to a future period in the amount of $10,546,026. This amount represents a sum of 1) the contributions made against the pension liability subsequent to measurement period of the pension liability in the amount of $3,509,493, 2) changes in assumptions in the amount of $5,407,460, and 3) a net difference between projected and actual earnings on plan investments on the pension fiduciary net position in the amount of $1,629,073 and will be recognized as an increase of pension expense over a closed period. The deferred outflow related to pension liability is the result of implementing GASB 68 and will be recognized in the subsequent measurement period. The City also reported a separate section for deferred inflows of resources in the amount of $2,206,012 related to the net pension liability. This amount represents a difference between expected and actual experiences in the amount of $2,206,012.

During fiscal 2017-18, the City implemented Governmental Accounting Standards Board (GASB) statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Therefore, the City has reported the City’s net Other Postemployment Benefits Other Than Pension (OPEB) asset and related deferred inflows and outflows in the City’s Financial Statements. Additional detailed information can be found in Note (17) of the Notes to the Financial Statements. A separate section is reported for deferred outflows of resources that represent a consumption of net position that applies to a future period in the amount of $101,068. This amount represents a sum of a net difference between projected and actual earnings on plan investments on the OPEB fiduciary net position and will be recognized as an increase of OPEB expense over a closed period. The deferred outflow related to OPEB asset is the result of implementing GASB 75 and will be recognized in the subsequent measurement period. The City also reported a separate section for deferred inflows of resources in the

6 City of Palmdale

Management’s Discussion and Analysis amount of $36,185 related to the net OPEB asset. This amount represents a difference between expected and actual experiences.

The City’s Other Liabilities reflect a balance of $59,467,919. Other Liabilities include short term liabilities totaling $10,204,714 that are considered payable within a year and consist of accounts payable, accrued salaries, and accrued interest. Included in Other liabilities is the Net Pension Liability in the amount of $42,266,965. Additional detailed information can be found at Note (15) of the Notes to the Financial Statements. The remaining balance in the amount of $6,996,240 in Other Liabilities consists of refundable deposits and unearned revenue.

City of Palmdale's Net Position

Governmental Governmental Activities Activities 2018 2017

Current and Other Assets $ 262,190,625 246,124,164 Capital Assets 726,387,205 736,744,251 Total Assets 988,577,830 982,868,415

Pension related amounts 10,546,026 11,192,868 Other postemployment benefits related amounts 101,068 - Total Deferred Outflows of Resources 10,647,094 11,192,868

Long-Term Liabilities Outstanding 92,172,249 84,791,685 Other Liabilities 59,467,919 62,453,435 Total Liabilities 151,640,168 147,245,120

Pension related amounts 2,206,012 1,854,356 Other postemployment benefits related amounts 36,185 - Total Deferred Inflows of Resources 2,242,197 1,854,356

Net Position Net Investment in Capital Assets 643,077,802 659,365,081 Restricted 158,892,011 149,318,498 Unrestricted 43,372,746 36,278,228 Total Net Position $ 845,342,559 844,961,807

The City of Palmdale's restricted net position of $158,892,011 represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position of $43,372,746 may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Palmdale is able to report positive balances in all three categories of net position for its governmental activities.

7 City of Palmdale

Management’s Discussion and Analysis

City of Palmdale's Changes in Net Position

Governmental Governmental Activities Activities Year ended Year ended June 30, 2018 June 30, 2017 Revenues: Program Revenues: Charges for Services $ 39,292,236 38,485,406 Operating Grants and Contributions 8,540,307 9,058,728 Capital Grants and Contributions 23,778,358 30,874,206 General Revenues: Property Taxes 20,983,338 19,514,208 Sales Taxes 19,267,083 18,577,244 Other Taxes 10,752,550 10,232,671 Proceeds from Land Sale 133,981 - Unrestricted Investment Earnings 519,275 (71,826) Other 594,975 592,876 Total Revenues 123,862,103 127,263,513

Expenses: General Government 16,416,215 15,162,734 Public Safety 28,284,134 26,436,495 Public Services 55,006,590 51,989,170 Community Development 7,584,015 8,715,698 Recreation and Culture 11,463,299 10,405,253 Health and Welfare 1,895,396 3,626,698 Interest on Long-Term Debt 3,327,586 3,948,940 Total Expenses 123,977,235 120,284,988

Increase in Net Position (115,132) 6,978,525 Net Position - Beginning of Year, as restated 845,457,691 837,983,282 Net Position - End of Year $ 845,342,559 844,961,807

Governmental Activities. Governmental activities decreased the City of Palmdale’s net position by $115,132 or 0.02 percent, during the current fiscal year. Key elements of the governmental activities net position increase are as follows:

• Charges for Services increased by $806,830, or 2.1 percent. The City reported increases in administrative fees of $409,083, $155,925 from sale of Water Credits earned, increases in various planning fees of $220,715, increases in various engineering fees of $250,047, increases from Waste Management Contract by $225,000 dedicated for street sweeping and illegal dumping cost, and increases in Assessments received from County Assessor’s Office of $668,339. The increases were offset by decreases of various fees by approximately $1,122,279 including Building Permit fees, Residential Unit fees, Healthcare Contributions and Afterschool Program fees.

8 City of Palmdale

Management’s Discussion and Analysis

• Operating grants and contributions decreased by $518,420 or 5.7 percent, primarily due to the decrease of grant receipts by $861,980 as the result of the termination of the Workforce Investment Act (WIA) for the America’s Job Center of California, formerly known as the South Valley WorkSource Center effective January 1, 2018. Other decreases totaling $779,143 include decreases in drainage fees, Federal Home Program Grants, and Sponsorships Inkind. The decreases were offset by increases in gas tax receipts that include the Road Repair and Accountability Act of 2017 received for a total of $304,122, increases in Interest Earnings of $348,070 and approximately $470,511 increases in Grants received from CDBG.

• Capital grants and contributions decreased by $7,095,848 or 22.9 percent, as a result of a decrease in capital assets donated by developers of $2,492,600, and decreases in Proposition C, Proposition R, Federal and State Grants received by a total of $6,284,319 as projects wind down in fiscal year 2017-18. The decreases are offset by funds received from Measure M of $1,681,071.

• Property Taxes increased by $1,469,130, or 7.5 percent due to an increase in FY 2017-18 taxable assessed values as compared to the assessed values in FY 2016-17. In addition, the City continues to receive increases due to restoration of assessed value from their Proposition 8 temporary reduction in assessed value as market conditions improve.

• Sales and Use Taxes increased by $689,839, or 3.7 percent primarily due to the increases in consumer interest in consumer goods, automobiles, dining out combined with the addition of new eateries led to solid growth from all restaurants and local retailers.

• Other Taxes increased by $519,879, or 5.1 percent as the result of general increases in Franchise Taxes, Transient Occupancy Taxes, Property Transfer Tax and Business Licenses Taxes.

• Unrestricted Investment Earnings increased by $591,101 as the result of recognizing positive value of Investments as of June 30th date in addition to increases in interest earnings.

• General Government expenses increased by $1,253,481, or 8.3 percent primarily due to the impact of six additional fulltime staff added midyear during fiscal year 2017-18, increases in replacement of computers and servers, and increases in health claims paid in the current year as compared to the prior year. Other increases include the increase in the Pension Liability by $1,420,137. The increases were offset by a reduction in the Net PERS Pension Liability adjustments, and fiscal year being a non-election year and the reduction in election costs in the current year as compared to the prior year. Other decreases include a decline in legal litigation and claim cost, decrease in the general liability reserves as compared to the prior year.

• Public Safety expenses increased by $1,847,639 or 6.9 percent primarily due to an increase in the law enforcement contract of $1,237,082 or 5.4 percent as compared to the prior year. Other increases include the impact from two fulltime staff added at midyear and increases in the Pension Liability offset by a reduction in the Net PERS Pension adjustments made during fiscal year 2017-18 as compared to the prior year.

• Public Service expenses increased by $3,017,420, or 5.8 percent as the result of increases in the Pension Liability by $2,084,672, increases in depreciation expense by $828,630, increases from the impact of four fulltime staff added at midyear offset by a reduction in the Net PERS Pension adjustments made during fiscal year 2017-18 as compared to the prior year.

9 City of Palmdale

Management’s Discussion and Analysis

• Community Development expenses decreased by $1,131,683 or 12.9 percent due to decline of the repairs and maintenance costs related to four Apartment Housing Facilities that consist of 291 units distributed across four (4) buildings, decreases in Housing Asset Programs by $296,052 offset by a decline in operating and maintenance costs related to the Mobile Home Parks of $354,610.

• Recreation and Culture expenses increased by $1,058,046 or 10.2 percent primarily as the result of increase in the maintenance of Park facilities, increase in Park programing, depreciation and increase in the Net Pension Liability offset by decreases in the Net PERS Pension adjustments made in the current year as compared to prior year.

• Health and Welfare expenses decreased by $1,731,302 or 47.7 percent primarily as the result of the termination of the Workforce Investment Act (WIA) for the America’s Job Center of California, formerly known as the South Valley WorkSource Center, effective January 1, 2018, resulting in decreases in expenses by $1,243,594. Other decreases include the decline in Sponsorships In-Kind in the current year as compared to the prior year.

• Interest on long-term debt decreased by $621,354 or 15.7 percent due to the result of savings from the prior year defeasance of debt at a lower interest rate.

Program Expenses and Program Revenues-Governmental Activities

$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$0

Expenses Revenues

10 City of Palmdale

Management’s Discussion and Analysis

The Statement of Activities reflects total expenses of $123,977,235. Program and general revenues totaling $123,862,103 were recognized by the government.

Revenues by Source-Governmental Activities

Unrestricted Inv Earnings Other Taxes 0.5% 8.7% Other Sales Taxes 0.5% 15.6%

Property Taxes 16.9% Charges for Services 31.7%

Capital Grants and Contributions Operating Grants 19.2% and Contributions 6.9%

Total revenues in the Statement of Activities for the year ended June 30, 2018 were $123,862,103. Of this amount, $71,610,901 of the resources came from program revenues, and $52,251,202 came from general revenues received by the government. The largest revenues are Charges for Services, followed by Capital Grants and Contributions, Property Taxes, Sales Tax, and Other Taxes.

Financial Analysis of the Government's Funds

As noted earlier, the City of Palmdale uses fund accounting to ensure and demonstrate compliance with finance related legal requirements.

Governmental Funds. The focus of the City of Palmdale's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Palmdale's financing requirements. In particular, fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City of Palmdale's governmental funds reported combined ending fund balances of $228,902,128, an increase of $22,863,086 in comparison with the prior year. The

11 City of Palmdale

Management’s Discussion and Analysis fund balances, which are more fully discussed and detailed on page 50 and page 63 of the notes to the financial statements, have been classified into the following categories:

• $11,072,269 “Nonspendable” because the resources are not in a spendable form (i.e., prepaids, long-term receivables, or non-financial assets held for resale).

• $183,450,213 is “Restricted” due to the existence of externally enforceable legal restrictions that are related primarily to special revenue funding sources and debt service reserves.

• $11,838,025 is “Assigned” for specific purposes such as continuing appropriations, encumbrances, compensated absences, self-insurance and health insurance claims, next years budgeted deficit.

• $22,541,621 is “Unassigned” and represents residual resources that cannot be properly classified in one of the other fund balance categories. This category is made up of positive unassigned balances of $35,914,833 in General Fund, offset overall by negative unassigned balances totaling $13,373,212 in other City Funds.

The General Fund is the chief operating fund of the City of Palmdale. At the end of the current fiscal year, the total fund balance of the general fund was $62,332,196. Of this amount, $11,072,269 was nonspendable, $3,507,069 was restricted, $11,838,025 was assigned, and $35,914,833 was unassigned. As a measure of the general fund's liquidity, it may be useful to compare both unassigned and total fund balance to total fund expenditures. Unassigned fund balance represents 61.7 percent of total General Fund expenditures, while total fund balance represents 107.0 percent of that same amount.

The City of Palmdale’s General Fund fund balance increased by $5,551,626 during the current fiscal year as the General Fund revenues exceeded expenditures. In comparison to last year, revenues increased overall by $3,209,420 and expenditures increased by $2,491,064. The revenue increases were primarily the result of increases in Property Tax revenue by $1,469,130, Sales Tax revenue by $689,839, other taxes by $508,102, use of property increased by $133,624, Charges for Current Services by $333,912, Fines and Forfeitures revenues increased by $110,249 and Interest and Net Increase in the Fair Value of Investments increased by $426,825 as compared to prior year revenues. Revenue increases were offset by decreases in licenses and permits and Subventions and Grants received in current year as compared to the prior year. The increases in expenditures were primarily the result of increases in the law enforcement contract by $1,237,077, and increases related to the impact of adding 12 new full time positions midyear offset by decreases in the Net PERS pension adjustment by 12 percent in fiscal year 2017-18.

The Housing Authority - Housing Asset Fund has a fund balance of $54,984,081 and is restricted for low and moderate-income housing purposes. This fund is used to record the assets formally held by the Community Redevelopment Agency Low and Moderate Income Housing Fund. The assets that were approved by the State Department of Finance to be retained by the Low and Moderate Housing Fund were transferred to the Housing Authority-Housing Asset Fund as the City has control of those assets, which may be used in accordance affordable housing provisions of California’s Community Redevelopment Law, as amended by Health and Safety Code 34176.1. The housing asset fund balance increased by $102,582 in the current fiscal year as the result of a decrease in cost related to multifamily low income housing programs.

12 City of Palmdale

Management’s Discussion and Analysis

The Housing Authority – Mobile Home Park is used to account for revenues and expenditures related to the operation of three mobile home parks. The total fund balance was at a deficit of $11,947,384. The deficit was reduced by $180,972 primarily as the result of a decline in operating expenditures.

The Street Lighting Assessment District Fund – has a fund balance of $14,948,682 and is used to account for revenues and expenditures related to the maintenance of the residential street lighting services. The street lighting assessment fund balance decreased by $520,863 as the result of the purchase of the street light poles from Southern California Edison during fiscal year 2017-18 and the increases in cost related to the acquisition and maintenance of the poles.

General Fund Budgetary Highlights

Differences between the original budget and the final amended budget resulted in a decrease of appropriations by $1,757,984 as the result of an adjustment in budget needs in operating expenses offset by increases in capital outlay. Differences between the final amended budget and actual resulted in a $17,195,983 decrease in appropriations and can be briefly summarized as follows:

• $4,662,346 decrease in general governmental activities. • $1,204,778 decrease in public safety contracts. • $9,255,303 decrease in public services. • $1,521 decrease in community development programs. • $955,518 decrease in cultural and recreational programs. • $18,269 decrease in health and welfare services. • $1,098,234 decrease in capital projects.

These decreases are due to not only expenditures coming in less than anticipated but also the result of activities that were budgeted but not completed during the current fiscal year and reclassifying activities to special revenue funds to comply with GASB 54. Overall, the reclassifying of expenditures resulted in a $9,427,621 reduction of transfers in and offsetting reduction to expenditures. See Note (1)S.

Capital Asset and Debt Administration

Capital Assets. The City of Palmdale's investment in capital assets for its governmental activities as of June 30, 2018, amounts to $726,387,205 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, improvements, machinery and equipment, infrastructure and construction in progress. The Capital Assets decreased by $9,643,965 in 2017-18 as compared to 2016-17. Depreciation on the capital assets is the primarily reason for the decrease.

City of Palmdale’s Capital Assets (Net of Depreciation)

Governmental Governmental Activities 2018 Activities 2017

Land and Improvement $ 116,589,167 $ 116,605,552 Buildings and Structures 54,694,637 54,694,637 Machinery and Equipment 5,507,120 4,933,238 Infrastructure 527,226,538 527,072,164 Construction in Progress 22,369,743 32,725,579 $ 726,387,205 $ 736,031,170

13 City of Palmdale

Management’s Discussion and Analysis

Major capital asset events during the current fiscal year included the following:

• Completion of various streets and resurfacing projects totaling $9,136,738.

• Completion of various traffic signal projects totaling $7,952,965.

• Completion of various storm drain and basin repair and mitigation improvements in the amount of $332,360.

• Completion of various sewer improvements in the amount of $182,400, of which $59,400 were contributed by Developers.

• Completion of various park facility and park improvement projects in the amount of $4,099,637.

• Completion of the acquisition of approximately 17,772 street light poles for $11,650,000.

Additional information on the City of Palmdale's capital assets can be found on page 67, Note (10).

Long-Term Debt. At the end of the current fiscal year, the City of Palmdale had total bonded debt outstanding of $68,716,224. The Mortgage Revenue Bonds are secured by pledges of net revenue received from the operation of the Housing Facilities. Certificates of Participation and Lease Revenue Bonds require the City to pay a semi-annual base rental to the Palmdale Civic Authority (PCA) and the Palmdale Financing Authority (PFA). The rentals will be used by the PCA and PFA to pay debt service as the Certificates of Participation and Lease Revenue Bonds come due.

City of Palmdale’s Outstanding Debt Revenue Bonds and Certificates of Participation

Governmental Governmental Activities Activities 2018 2017

Revenue Bonds $ 7,190,000 $ 7,705,000 Mortgage Revenue Bonds 4,100,000 4,185,000 Certificates of Participation 56,310,000 58,635,000 Bond Premiums 1,116,224 1,371,782 Total $ 68,716,224 $ 71,896,782

The City of Palmdale’s total debt was $92,172,249 of which $68,716,224 was Revenue Bonds and Certificates of Participation as noted on the schedule above. The remainder of the debt was comprised of $3,021,840 in compensated absences, $1,996,589 in self-insurance liability claims, $1,091,639 in capital leases payable for equipment purchases and $17,345,957 in notes payable, primarily for streetlight acquisition, retrofitting of City facilities, developer infrastructure and a Section 108 HUD Loan.

The City of Palmdale's total debt increased by $7,380,564 or 8.7 percent, during the current fiscal year. The increase is primarily due to the financing of the streetlight acquisition during fiscal year 2017-18 for

14 City of Palmdale

Management’s Discussion and Analysis

$11,397,102, and additional debt added from on bill financing of LED Retrofitting at City facilities. The increase was offset by regular scheduled annual debt payments and the reduction of Self Insurance Liability Claims. See Long Term Debt Note (12).

At the end of the current fiscal year, the City of Palmdale had a Net Pension Liability of $42,266,965. Additional information on the City of Palmdale’s net pension liability can be found on pages 82-86, Note (15).

Additional information on the Successor Agency’s debt can be found on pages 93-98, Note (19) and at the Other Information Section beginning at page 191.

Additional information on the City of Palmdale’s debt can be found on pages 69-78, Note (11) and Note (12).

Economic Factors and Next Year’s Budgets and Rates

The City took into consideration the following factors in preparing the budget for the 2018-19 fiscal year:

• Modest Property tax increases as property values slowly increase. • Continued slow paced growth in housing development. • Modest sales tax increases • Conservative escalators and only add known future development • Aligning revenues with expenditures • Using onetime revenues for onetime expenditures • Building reserves for future capital replacements and economic uncertainties • Prefunding retiree pension cost • City funds impacted by State and Federal budget actions.

The dissolution of redevelopment (per AB1X26 and AB1484) has and will continue to impact the City for a number of years. The City and Successor Agency have been busy responding to the numerous new reporting and auditing requirements of AB1X26 and AB1484. In addition to instituting new reporting and auditing requirements, as reflected in these financial statements, the City and the Successor Agency have had to interpret new statutes and their requirements and deadlines. Additional information can be found at Note (19).

Requests for Information

This financial report is designed to provide a general overview of the City of Palmdale's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report, requests for any of the separately issued component unit financial statements or additional financial information should be addressed to the City of Palmdale, Office of the Finance Manager, 38300 Sierra Highway, Suite D, Palmdale, California, 93550.

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16 ______

Government-Wide Financial Statements ______

17 City of Palmdale Statement of Net Position June 30, 2018

Governmental Assets: Activities Cash $ 1,518,058 Investments 173,825,131 Accounts Receivable 12,146,740 Interest Receivable 5,217,813 Property Taxes Receivable 1,038,639 Due from Other Governmental Units 15,515,900 Notes and Liens 28,341,487 Deposits and Prepaids 473,247 Net OPEB Asset 572,975 Land Held for Development 3,264,430 Permit Held for Development 10,158,182 Restricted Assets: Cash and Investments 10,105,162 Interest Receivable 12,861 Capital Assets: Not Being Depreciated: Land and Improvements 116,589,167 Construction in Progress 22,369,743 Being Depreciated, Net of Accumulated Depreciation: Buildings and Structures 54,694,637 Machinery, Equipment and Other Improvements 5,507,120 Infrastructure 527,226,538 Total Assets 988,577,830

Deferred Outflows of Resources: Pension Related Amounts 10,546,026 Other Postemployment Benefits Related Amounts 101,068 Total Deferred Outflows of Resources 10,647,094

Liabilities: Accounts Payable 7,252,098 Accrued Salaries & Employee Benefits 1,032,675 Due to Other Governmental Units 2,065 Deposits 3,290,201 Accrued Interest Payable 1,917,876 Unearned Revenue 3,706,039 Noncurrent Liabilities: Due Within One Year 6,495,672 Due in More than One Year 85,676,577 Net Pension Liability 42,266,965 Total Liabilities 151,640,168 Deferred Inflows of Resources: Pension Related Amounts 2,206,012 Other Postemployment Benefits Related Amounts 36,185 Total Deferred Inflows of Resources 2,242,197

Net Position: Net Investment in Capital Assets 643,077,802 Restricted for: Public Safety 3,316,329 Public Services 85,814,038 Community Development 68,784,685 Cultural and Recreation 10,458 Debt Service 966,501 Unrestricted 43,372,746 Total Net Position $ 845,342,559

See Accompanying Notes to the Financial Statements

18 City of Palmdale Statement of Activities For the Year Ended June 30, 2018

Program Revenues Net (Expense) Operating Capital Revenue and Charges for Grants and Grants and Change in Expenses Services Contributions Contributions Net Position

Governmental Activities: General Government $ 16,416,215 $ 6,716,003 $ 31,883 $ 4,604 $ (9,663,725) Public Safety 28,284,134 2,687,364 486,628 474,292 (24,635,850) Public Services 55,006,590 17,545,979 4,547,281 22,204,083 (10,709,247) Community Development 7,584,015 6,775,750 1,829,974 583,496 1,605,205 Cultural and Recreational 11,463,299 5,255,553 269,980 511,883 (5,425,883) Health and Welfare 1,895,396 311,587 1,374,561 - (209,248) Interest on Long-Term Debt 3,327,586 - - - (3,327,586)

Total Governmental Activities $ 123,977,235 $ 39,292,236 $ 8,540,307 $ 23,778,358 (52,366,334)

General Revenues:

Taxes: Property Taxes 20,983,338 Sales and Use Taxes 19,267,083 Unrestricted Motor Vehicle in Lieu 83,487 Franchise Taxes 5,463,623 Transient Occupancy Taxes 4,028,350 Property Transfer Taxes 548,787 Business License Taxes 628,303 Sale of Land 133,981 Unrestricted Investment Earnings 519,275 Other 594,975

Total General Revenues 52,251,202

Change in Net Position (115,132)

Net Position - Beginning of Year, as restated 845,457,691

Net Position - End of Year $ 845,342,559

See Accompanying Notes to the Financial Statements

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20 ______

Governmental Fund Financial Statements ______

The General Fund – is the City’s primary operating fund and has been classified as a major fund. It accounts for all financial resources of the general government that are not already required legally or by sound financial management to be accounted for in another fund.

Special Revenue Funds – are used to account for specific revenues that are restricted or committed to expenditure for a specific purpose other than debt service or capital projects. The following funds have been classified as major funds:

Housing Authority (HA) Housing Asset Fund – Used to account for the restricted housing assets of the former CRA Housing Development Fund, which were transferred to the Successor Agency Fund and then transferred to the Housing Authority – Housing Asset Fund upon acceptance of the Housing Successor role by the City. Revenues received from assets previously held by the former CRA Housing Development Fund are restricted to be used in accordance with affordable housing provisions of California’s Community Redevelopment Law, as amended by Health and Safety Code Section 34176.1.

Housing Authority (HA) Mobile Home Parks - This fund is used to account for revenues and expenditures restricted to the operations of three mobile home parks.

Street Lighting Assessment District Fund - This fund is used to account for revenues and expenditures restricted to residential street lighting services.

21 City of Palmdale Balance Sheet Governmental Funds June 30, 2018

Special Revenue Funds Total Street Lighting Other Total HA Housing HA Mobile Assessment Governmental Governmental Assets General Asset Fund Home Park District Funds Funds

Assets: Cash $ 684,636 $ - $ 482,274 $ - $ 351,148 $ 1,518,058 Investments 52,938,148 12,789,248 244,215 15,620,315 92,233,205 173,825,131 Receivables: Accounts and Interest Receivable 4,893,655 2,941,705 8,021 54,343 9,466,829 17,364,553 Property Taxes Receivable 475,306 - - 140,673 422,660 1,038,639 Due from Other Funds (Note 4A) 400,484 87,513 - - 1,846,865 2,334,862 Due from Agency Funds 186,745 - - - - 186,745 Advances Due from Fiduciary Funds (Note 19D) 378,665 8,809,422 - - 583,859 9,771,946 Due from Other Governmental Units 5,557,209 - - - - 5,557,209 Notes and Liens (Note 5) 47,893 19,510,031 - - 8,783,562 28,341,486 Interfund Promissory Note (Note 4D) - 11,115,000 - - - 11,115,000 Advances Due from Other Funds - 1,186,001 - - - 1,186,001 Deposits and Prepaids 462,463 - 9,670 - 1,114 473,247 Restricted Assets: Investments 1,000,000 3,019,140 - - 6,086,023 10,105,163 Interest Receivable - 613 - - 12,248 12,861 Land Held for Development - 2,097,267 69,593 - 1,097,570 3,264,430 Permit Held for Development 10,158,182 - - - - 10,158,182

Total Assets $ 77,183,386 $ 61,555,940 $ 813,773 $ 15,815,331 $ 120,885,083 $ 276,253,513

Liabilities, Deferred Inflows of Resources and Fund Balances

Liabilities: Accounts Payable $ 4,745,058 $ 214,428 $ 229,421 $ 866,649 $ 2,229,218 $ 8,284,774 Due to Fiduciary Funds 500 - - - 1,565 2,065 Due to Other Funds - 268,565 - - 2,066,297 2,334,862 Self Insurance Liability 1,170,537 - - - - 1,170,537 Advances Due to Other Funds - - 1,186,001 - - 1,186,001 Interfund Promissory Note - - 11,115,000 - - 11,115,000 Deposits 2,894,986 - 230,735 - 164,480 3,290,201 Unearned Revenue 341,626 3,311,000 - - 53,413 3,706,039 Notes Payable 216,487 - - - 138,368 354,855

Total Liabilities 9,369,194 3,793,993 12,761,157 866,649 4,653,341 31,444,334

Deferred Inflows of Resources: Unavailable Revenue-Reimbursements 5,481,996 2,777,866 - - 7,647,189 15,907,051

Total Deferred Inflows of Resources 5,481,996 2,777,866 - - 7,647,189 15,907,051

Fund Balances: Nonspendable 11,072,269 - - - - 11,072,269 Restricted 3,507,069 54,984,081 79,263 14,948,682 109,931,118 183,450,213 Assigned 11,838,025 - - - - 11,838,025 Unassigned 35,914,833 - (12,026,647) - (1,346,565) 22,541,621

Total Fund Balances 62,332,196 54,984,081 (11,947,384) 14,948,682 108,584,553 228,902,128

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 77,183,386 $ 61,555,940 $ 813,773 $ 15,815,331 $ 120,885,083 $ 276,253,513

See Accompanying Notes to the Financial Statements

22 City of Palmdale Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2018

Total Fund Balances - Total Governmental Funds (page 22) $ 228,902,128

Amounts reported for Governmental Activities in the Statement of Net Position (page 18) are different because:

Capital Assets used in governmental activities are not current financial resources and therefore are not reported in the Governmental Funds Balance Sheet.

Governmental Capital Assets $ 1,312,102,348 Less Accumulated Depreciation (585,715,143) 726,387,205

The Net OPEB Asset reported in governmental activities is not a current financial resource and therefore is not reported in the funds. 572,975

Accounts receivable not available to pay for current-period expenditures are unavailable in the funds 15,907,051

Interest Due on Long-Term Debt do not require current financial resources and therefore are not reported as a liability in the Governmental Funds Balance Sheet.

Interest Payable (1,917,876)

Deferred Outflows related to pensions and OPEB benefits are deferred outflows of resources and not reported in the Governmental Fund Balance Sheet.

Deferred Outflows Related to Pensions 10,546,026 Deferred Outflows Related to OPEB Benefts 101,068

Long-Term Liabilities are not due and payable in the current period and therefore are not reported as a liability in the Governmental Funds Balance Sheet.

Compensated Absences $ 3,021,840 Claims Payable 826,052 Net Pension Liability 42,266,965 Capital Leases Payable 1,091,639 Notes Payable 16,991,101 Bonds & Certificates of Participation Payable 67,600,000 Plus Issuance Premiums 1,116,224 (132,913,821)

Deferred Inflows related to pensions and OPEB benefits are deferred inflows of resources and are not reported in the Governmental Fund Balance Sheet.

Deferred Inflows Related to Pensions (2,206,012) Deferred Inflows Related to OPEB Benefits (36,185)

Net Position of Governmental Activities (page 18) $ 845,342,559

See Accompanying Notes to the Financial Statements

23 City of Palmdale Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2018

Special Revenue Funds Street Lighting Total Other Total HA Housing HA Mobile Assessment Governmental Governmental General Asset Fund Home Park District Funds Funds Revenues: Property Taxes $ 20,983,338 $ - $ - $ - $ - $ 20,983,338 Sales and Use Taxes 19,267,083 - - - - 19,267,083 Other Taxes 10,669,063 - - - 3,310,498 13,979,561 Subventions and Grants 100,662 - - - 28,369,554 28,470,216 Park Development Fees - - - - 489,840 489,840 Licenses and Permits 2,086,684 - - - 94,009 2,180,693 Motor Vehicle License Fees 83,487 - - - - 83,487 Fines and Forfeitures 360,779 - - - 291,125 651,904 Special Assessments - - - 4,460,048 13,744,276 18,204,324 Use of Property 964,854 - 4,584,108 - 2,300,021 7,848,983 Charges for Current Services 6,231,329 208,327 - 9,213 1,683,467 8,132,336 Drainage Fees - - - - 262,141 262,141 Traffic Impact Fees - - - - 612,063 612,063 Facilities Impact Fees - - - - 592,161 592,161 Interfund Interest - 516,103 - - - 516,103 Interest 658,387 222,742 3,258 216,000 1,159,994 2,260,381 Net Decrease in the Fair Value of Investments (297,771) (69,199) (1,320) (81,923) (491,495) (941,708) Developer Contributions - - - 15,000 5,000 20,000 State Contributions - - - - 7,443 7,443 Successor Agency Contributions 35,953 - - - - 35,953 County Contributions - - - - 118,710 118,710 Other 3,284,913 - - 4,472 636,138 3,925,523

Total Revenues 64,428,761 877,973 4,586,046 4,622,810 53,184,945 127,700,535 Expenditures: Current: General Government 15,009,384 - - - 620,564 15,629,948 Public Safety 27,366,992 - - - 740,236 28,107,228 Public Services 1,815,793 - - 3,909,916 15,255,208 20,980,917 Community Development 600,289 871,856 2,965,128 2,129,185 6,566,458 Cultural and Recreational 8,613,062 - - - 1,473,374 10,086,436 Health and Welfare 701,781 - - - 1,170,237 1,872,018 Capital Outlay 2,019,636 - 925,995 12,472,013 10,518,002 25,935,646 Debt service: Principal 1,137,667 - - - 2,288,000 3,425,667 Interfund Interest - - 516,103 - - 516,103 Cost of Issuance - - - 157,280 - 157,280 Interest 967,549 - - 1,566 2,379,377 3,348,492

Total Expenditures 58,232,153 871,856 4,407,226 16,540,775 36,574,183 116,626,193 Excess (Deficiency) of Revenues Over (Under) Expenditures 6,196,608 6,117 178,820 (11, 917,965) 16,610,762 11,074,342

Other Financing Sources (Uses): Issuance of Loan - - - 11,397,102 - 11,397,102 Issuance of Capital Leases 14,161 - - - - 14,161 Sale of Land 243,500 133,981 - - - 377,481 Transfers In 3,566,128 - 2,152 - 4,584,888 8,153,168 Transfers Out (4,468,771) (37,516) - - (3,646,881) (8,153,168)

Total Other Financing Sources (Uses) (644,982) 96,465 2,152 11,397,102 938,007 11,788,744

Net Change in Fund Balances 5,551,626 102,582 180, 972 (520,863) 17,548,769 22,863,086

Fund Balances (Deficit) - Beginning of Year 56,780,570 54,881,499 (12,128,356) 15,469,545 91,035,784 206,039,042

Fund Balances (Deficit) - End of Year $ 62,332,196 $ 54,984,081 $ (11,947,384) $ 14,948,682 $ 108,584,553 $ 228,902,128

See Accompanying Notes to the Financial Statements

24 City of Palmdale Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities and Changes in Net Position For the Year Ended June 30, 2018

Net Change in Fund Balances - Total Governmental Funds (page 24) $ 22,863,086

Amounts reported for governmental activities in the Statement of Activities and Changes in Net Position (page 19) are different because:

Governmental Funds report capital outlays as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets is allocated over their estimated useful lives and recorded as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.

Capital Asset Additions - Current Year $ 59,998,481 Capital Asset Deletions - Current Year (35,035,841) Less Depreciation Expense (35,319,686) (10,357,046)

Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.

Grant Revenues Earned, but not received within the 60-day Accrual Period (3,530,161)

Long-Term Debt Issuance provide current financial resources to Governmental Funds, but issuing debt increases long-term liabilities in the Government-Wide Statement of Net Position. Principal repayments of long-term debt and escrow agent payments are expenditures/uses in the Governmental Funds, but they reduce long-term liabilities in the Government-Wide Statement of Net Position. Also premiums are recognized in the current period in the Governmental Funds, whereas these amounts are amortized in the Government-Wide Statement of Activities. This is the amount by which repayments exceeded proceeds.

Debt Issued or Incurred: Bond Issuance $ (11,397,102) Capital leases (14,161) Self Insurance Liability Claims Payable 707,894 Principal Repayments: Capital Leases 232,667 Notes Payable 268,000 Bonds & Certificates of Participation Payable 2,925,000 (7,277,702)

Some Expenses reported in the Government-Wide Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the Governmental Funds.

Compensated Absences $ 70,297 Pension Expense (2,037,770) OPEB Expense (24,020) Accrued Interest on Debt (77,374) Amortization of Bond Premiums 255,558 (1,813,309)

Change in Net Position of Governmental Activities (page 19) $ (115,132)

See Accompanying Notes to the Financial Statements

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26

Budgetary Comparison Statements

27 City of Palmdale Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Property Taxes $ 20,080,630 $ 21,110,310 $ 20,983,338 $ (126,972) Sales and Use Taxes 19,000,000 19,300,000 19,267,083 (32,917) Other Taxes 10,257,150 11,339,460 10,669,063 (670,397) Subventions and Grants 101,000 111,640 100,662 (10,978) Licenses and Permits 1,962,220 1,834,420 2,086,684 252,264 Motor Vehicle License Fees - 83,480 83,487 7 Fines and Forfeitures 280,000 314,410 360,779 46,369 Use of Property 799,730 847,820 964,854 117,034 Charges for Current Services 6,440,290 6,519,140 6,231,329 (287,811) Interest 303,100 428,200 658,387 230,187 Net Decrease in the Fair Value of Investments - - (297,771) (297,771) Other Agency Contributions 35,960 35,960 35,953 (7) Other 3,234,320 3,145,320 3,284,913 139,593 Total Revenues 62,494,400 65,070,160 64,428,761 (641,399)

Expenditures: Current: General Government 21,760,430 19,671,730 15,009,384 4,662,346 Public Safety 28,526,000 28,571,770 27,366,992 1,204,778 Public Services 10, 920,990 11,071,096 1,815,793 9,255,303 Community Development 761,480 601,810 600,289 1,521 Cultural and Recreational 9,335,360 9,568,580 8,613,062 955,518 Health and Welfare 900,050 720,050 701,781 18,269 Capital Outlay 2,878,300 3,117,870 2,019,636 1,098,234 Debt Service: Principal 1,136,100 1,137,670 1,137,667 3 Interest 967,370 967,560 967,549 11 Total Expenditures 77,186,080 75,428,136 58,232,153 17,195,983

Excess (Deficiency) of Revenues: Over (Under) Expenditures (14,691,680) (10,357,976) 6,196,608 16,554,584

Other Financing Sources (Uses): Issuance of Capital Leases - - 14,161 14,161 Land Sale Proceeds - - 243,500 243,500 Transfers In 14,759,950 14,490,700 3,566,128 (10,924,572) Transfers Out (4,363,940) (3,999,890) (4,468,771) (468,881)

Total Other Financing Sources (Uses) 10,396,010 10,490,810 (644,982) (11,135,792)

Net Change in Fund Balance (4,295,670) 132,834 5,551,626 5,418,792

Fund Balance - Beginning of Year 56,780,570 56,780,570 56,780,570 -

Fund Balance - End of Year $ 52,484,900 $ 56,913,404 $ 62,332,196 $ 5,418,792

See Accompanying Notes to the Financial Statements

28 City of Palmdale Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Housing Authority - Housing Asset Fund - Special Revenue Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Charges for Current Services $ 126,550 $ 205,390 $ 208,327 $ 2,937 Interfund Interest - - 516,103 516,103 Interest 577,270 617,210 222,742 (394,468) Elim Combined Funds Int Rev 515,090 577,070 - (577,070) Net Decrease in the Fair Value of Investments - - (69,199) (69,199) Other Agency Contributions 1,500,000 1,500,000 - (1,500,000)

Total Revenues 2,718,910 2,899,670 877,973 (2,021,697)

Expenditures: Current: Community Development 3,178,150 9,942,530 871,856 9,070,674

Total Expenditures 3,178,150 9,942,530 871,856 9,070,674

Excess (Deficiency) of Revenues: Over (Under) Expenditures (459,240) (7,042,860) 6,117 7,048,977

Other Financing Sources (Uses): Sale of Land - 133,980 133,981 1 Transfers In 845,000 779,990 - (779,990) Transfers Out (497,580) (524,270) (37,516) 486,754

Total Other Financing Sources (Uses) 347,420 389,700 96,465 (293,235)

Net Change in Fund Balance (111,820) (6,653,160) 102,582 6,755,742

Fund Balance - Beginning of Year 54,881,499 54,881,499 54,881,499 -

Fund Balance - End of Year $ 54,769,679 $ 48,228,339 $ 54,984,081 $ 6,755,742

See Accompanying Notes to the Financial Statements

29 City of Palmdale Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Housing Authority Mobile Home Parks Special Revenue Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Use of Property $ 4,564,430 $ 4,596,860 $ 4,584,108 $ (12,752) Interest 1,500 1,000 3,258 2,258 Net Decrease in the Fair Value of Investments - - (1,320) (1,320)

Total Revenues 4,565,930 4,597,860 4,586,046 (11,814)

Expenditures: Current: Community Development 3,713,550 3,100,520 2,965,128 135,392 Debt Service: Interfund Interest 515,090 577,070 516,103 60,967 Capital Outlay - 949,000 925,995 23,005

Total Expenditures 4,228,640 4,626,590 4,407,226 219,364

Excess (Deficiency) of Revenues: Over (Under) Expenditures 337,290 (28,730) 178,820 207,550

Other Financing Sources (Uses): Transfers In - - 2,152 2,152 Transfers Out (845,000) (779,990) - 779,990

Total Other Financing Sources (Uses) (845,000) (779,990) 2,152 782,142

Net Change in Fund Balance (507,710) (808,720) 180,972 989,692

Fund Balance (Deficit) - Beginning of Year (12,128,356) (12,128,356) (12,128,356) -

Fund Balance (Deficit) - End of Year $ (12,636,066) $ (12,937,076) $ (11,947,384) $ 989,692

See Accompanying Notes to the Financial Statements

30 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Street Lighting Assessment District For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Special Assessments $ 3,795,900 $ 3,721,570 $ 4,460,048 $ 738,478 Use of Property 50,000 50,000 - (50,000) Charges for Current Services - - 9,213 9,213 Interest 65,000 65,000 216,000 151,000 Net Decrease in the Fair Value of Investments - - (81,923) (81,923) Developer Contributions 16,500 16,500 15,000 (1,500) Other 2,200 1,450 4,472 3,022

Total Revenues 3,929,600 3,854,520 4,622,810 768,290

Expenditures: Current: Public Services 4,483,440 4,564,440 3,909,916 654,524 Capital Outlay: Capital Outlay 19,205,580 19,033,850 12,472,013 6,561,837 Debt Service: Interest - 1,600 1,566 34 Cost of Issuance - 157,870 157,280 590

Total Expenditures 23,689,020 23,757,760 16,540,775 7,216,985

Excess (Deficiency) of Revenues Over (Under) Expenditures (19,759,420) (19,903,240) (11,917,965) 7,985,275

Other Financing Sources (Uses): Issuance of Bonds 18,716,750 18,716,750 11,397,102 (7,319,648) Transfers In - 934,250 - (934,250) Transfers Out - (934,250) - 934,250

Total Other Financing Sources (Uses) 18,716,750 18,716,750 11,397,102 (7,319,648)

Net Change in Fund Balance (1,042,670) (1,186,490) (520,863) 7,985,275

Fund Balance - Beginning of Year 15,469,545 15,469,545 15,469,545 -

Fund Balance - End of Year $ 14,426,875 $ 14,283,055 $ 14,948,682 $ 665,627

See Accompanying Notes to the Financial Statements

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32 ______

Fiduciary Fund Financial Statement ______

The City’s Fiduciary Funds are Agency Funds, Retiree Health Premium Trust Funds, and Private-purpose Trust Funds. Agency Funds, Retiree Health Premium Trust Funds, and Private-purpose Trust Funds are used to account for assets held by the City as an agency for other governmental units, private organizations, individuals and/or other funds.

Assessment and Community Facilities Districts Fund – This fund is used to account for receipts and disbursements associated with 1915 Act Assessment Bonds and Special Tax Bonds, which are administered by, but are not the liability of, the City.

Retiree Health Premium Trust Funds - This fund is used to account for the receipt of City funds held in trust to provide Eligible Retirees with a supplement to reduce their premiums for participating in the City’s Health Plan.

Successor Agency Private-purpose Trust Funds - This fund is used to account for the assets, liabilities and activities of the former Community Redevelopment Agency of the City of Palmdale in a trustee capacity to pay enforceable obligations of the former Community Redevelopment Agency. As more fully explained at Note 20, on February 1, 2012 in accordance with Assembly Bill (ABX126 and 1484) all redevelopment agencies in the State of California were dissolved. Assets and liabilities were transferred to the Successor Agency Private Purpose Trust Fund that is used to account for assets held by the City of Palmdale’s former Redevelopment Agency. The City has agreed to serve as the successor agency to hold the assets until all enforceable obligations of the prior redevelopment agency have been paid in full and they are distributed to other units of state and local government.

33 City of Palmdale Statement of Fiduciary Net Position Fiduciary Funds June 30, 2018 Successor OPEB Agency Private Agency Trust Purpose Trust Funds Funds Funds Assets: Cash $ - $ - $ 7,408,903 Cash- OPEB Trust Money Market Funds - 2,109,344 - Investments - OPEB Trust Mutual Funds - 3,119,368 - Receivables: Property Taxes Receivable 700,381 - 105 Interest Receivable - - 41,184 Accounts Receivable - - 16,000 Due from Other Government Units 1,565 - 500 Notes and Liens - - 190,415 Land Held for Development - - 6,540,933 Restricted Assets: Cash and Investments 8,620,881 - 6,585,605 Interest Receivable 11,839 - 1,092 Capital Assets: Not Being Depreciated: Land and Improvements - - 3,861,891 Construction in Progress - - 1,987,118 Being Depreciated, Net of Accummulated Depreciation: Buildings and Structures - - 219,777

Total Assets $ 9,334,666 5,228,712 26,853,523

Deferred Outflows of Resources: Deferred Charge on Refunding 2,350,565

Liabilities: Accounts Payable 4,120 164,066 92,055 Advances Due to General Fund 186,745 - 378,665 Advances Due to Improvement Fund 583,859 - - Advances Due to City of Palmdale - - 8,809,422 Deposits 84,706 - - Accrued Interest Payable - - 1,493,006 Long-Term Liabilities: Due Within One Year - - 7,471,677 Due in More than One Year 8,475,236 - 100,035,720

Total Liabilities $ 9,334,666 164,066 118,280,545

Net Position: Net Position Restricted for OPEB Benefits 5,064,646 - Net Postion (Deficit) Held in Trust - (89,076,457)

Total Net Position (Deficit) Held in Trust $ 5,064,646 $ (89,076,457)

See Accompanying Notes to the Financial Statements

34 City of Palmdale Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2018 Successor Agency Private OPEB Purpose Trust Trust Funds Funds Additions: Employer Contributions to Retiree Medical Trust $ 164,177 $ - Property Taxes - 50,636,344 Use of Property - 6,750 Investment and interest income 171,086 122,928 (Loss) on Sale of Land - (1,155,041) Net Investment Gains (Losses) 82,534 - Total Additions 417,797 49,610,981

Deductions: Benefits paid to participants 383,642 - General Government - 1,378,718 Community Development - 429,736 Intergovernmental-Tax Sharing - 39,943,143 Depreciation - 8,763 Interest Expense - 3,543,287 Total Deductions 383,642 45,303,647

Change in Net Position held in Trust 34,155 4,307,334

Net Position (Deficit) Held in Trust at beginning of year 5,030,491 (93,383,791)

Net Position (Deficit) Held in Trust at end of year $ 5,064,646 $ (89,076,457)

See Accompanying Notes to the Financial Statements

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36

Notes to the

Financial Statements

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

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City of Palmdale Table of Contents to the Notes to the Financial Statements For the Year Ended June 30, 2018

Note Page No. (1) Summary of Significant Accounting Policies………..……………………………………………… 41 A. Description of the Reporting Entity……………………………………………..………....…...….. 41 B. Financial Statement Presentation, Basis of Accounting, and Measurement Focus…………....…… 43 C. Budgets and Budgetary Accounting…………..………………..…………………………...……… 45 D. Cash and Investments……………..……………………..………………………………...…..…… 46 E. Short-Term Interfund Receivables and Payables………………….…...…………...……….……... 46 F. Advances Between Funds……………………..………………………….………………………... 47 G. Prepaid Items…………………..…………………………………………..…...…………………... 47 H. Land Held for Development …………………………………………..………..………………….. 47 I. Permit Held for Development……………………………………..………..……...……………… 47 J. Restricted Assets……………………………………………………..……...……...…………..….. 47 K. Capital Assets…………………………………………………………..……..……...…….…….… 47 L. Deferred Outflows/Inflows of Resources…………………………………..……..………………... 48 M. Compensated Absences……………………...……...…………………..…………...………….….. 48 N. Pensions…………...……………………………………………..……..…….……...... 49 O. Other Postemployment Benefits (OPEB)………………………………………………………….. 49 P. Long-Term Obligations………………...…………………………………..……..…….………..… 50 Q. Fund Balance...... …………………………………………………………....…….………..… 50 R. Deficit Fund Equity………………………...……………………………………..….……………. 51 S. Expenditures Exceeding Appropriations………………………………………………..………….. 51 T. Property Taxes………………………………………...... ……………………………..…………… 52 U. Use of Estimates………………………..……………………………………………..……………. 52 V. Implemented Accounting Pronouncements…………………..………………………..…………… 53 (2) Cash and Investments……………………………………………………………………..…….……. 54 A. Investments Authorized by the California Code and the City of Palmdale’s Investment Policy….. 54 B. Investments Authorized by the Debt Agreements.………………………………………...... … 55 C. Disclosures Related to Interest Rate Risk………………………………………………..….....…... 55 D. Disclosures Relating to Credit Risk…………………………………………………………...…… 56 E. Concentration of Credit Risk………………………………....………………………………...…... 57 F. Custodial Credit Risk…………………………………………………………...………..…..…….. 57 G. Investment in State Investment Pool…………………………………..………………...…..……... 58 H. Disclosures Relating to Fair Value of Investments…………………………….………….………. 58 I. PARS Section 115 – Pension Stabilization Trust…………………………….………….………... 59 (3) Interfund Transfers..………………..………………………………………….…………………….. 59

37 City of Palmdale Table of Contents to the Notes to the Financial Statements For the Year Ended June 30, 2018

Note Page No. (4) Interfund Assets/Liabilities………………………………………………………………...………… 60 A. Due From/To Other Funds for the Year Ended June 30, 2018…………………………..………… 60 B. Advances Due From/To Agency Funds at June 30, 2018……………………...…………………. 60 C. Advances Due From/To Drainage Funds at June 30, 2018……………………………..…..…….. 60 D. Advances Due From Fiduciary Funds as of June 30, 2018……………………………..………… 61 E. Interfund Promissory Note Receivable and Payable as of June 30, 2018…………………..……… 61 F. Advanced Due From/To Other Funds as June 30, 2018…………………..………………………. 62 (5) Notes Receivable……………………………………………………………………………………… 62 A. City Loans ………………………………………..……………………………………...………… 62 B. Federal Home Program Loans………………………………………...…………………..……….. 62 C. CDBG/NSP Program Loans…………………………………………………………..……………. 63 D. Housing Program……………..………………………………………………………...………….. 63 (6) Fund Balance Classification…………….…………………………………………………….……… 63 (7) Joint Ventures………………………………………………………………………………………… 64 A. Antelope Valley Transit Authority…………………………………………..…………………….. 64 B. Palmdale Recycled Water Authority……………………………………………………….……… 64 (8) Risk Management…….………………………….…………………………….……………………... 64 (9) Unearned Revenue/Unavailable Revenue………………………..………………………...……….. 66 (10) Capital Assets………………………………………...……………………………………………….. 67 (11) Capital Leases…..…………………………………………………………………………………….. 68 (12) Long Term Debt……..……………………………………………………………………….…….…. 69 A. Notes Payable…………………...………………………………………………………...………... 69 Section 108 HUD Note Payable……………...………………………..…………………………… 69 HOME Loan Note Payable…………………………………………………………………….…… 69 2017 Installment Payable of Streetlight Acquisition ($11,397,102)………………………………. 70 2017 On Bill Financing …………………………………………………………………………… 71 2018 Habitat for Heroes Development Loan ($268,565)………………………………………….. 72 B. Revenue Bonds…………………………………..……………………………………...…………. 73 2012 Lease Revenue Bonds Payable ($8,695,000)………………………………………….……. 73 2015 Multifamily Housing Revenue Bonds Payable………………………………………………. 74 2017 Lease Revenue Bonds Payable ($17,475,000) ………………………………………………. 75

C. Certificates of Participation…………..………………………...…………………………...……… 76

2007 Certificates of Participation Payable ($19,960,000)…………………..…..………….……… 76 2014 Certificates of Participation Payable ($25,920,000)……………………………….………… 77

38 City of Palmdale Table of Contents to the Notes to the Financial Statements For the Year Ended June 30, 2018

Note Page No. D. Change in Long-Term Liabilities……………………………...………………………….….…….. 78 (13) Special Assessment Districts and Community Facilities District Bonds.………...….....………..… 78 A. Bonds Outstanding…………...…….……………………………………………..……….……..… 78 Community Facilities District No. 91-1 (Sierra Gateway) Special Tax Bonds………………….… 78

Community Facilities District No. 93-1 (Ritter Ranch) Special Tax Bonds……..………………… 79 Community Facilities District No. 2003-1 (Anaverde Improvement Area A) Special Tax 79 Bonds……………………………………………………………………………………….………. Community Facilities District No. 05-1 (Trade & Commerce Center) Special Tax Bonds…….…. 79 Community Facilities District No. 05-1 (Trade & Commerce Center Area) 2007 Special Tax 79 refunding Bonds, Series A………………………………………………………………………… Assessment District No. 2006-1 (Godde Hills Estates Sewer Improvements) Limited Obligation 80 Improvement Bonds…………………………………………………………………………...…… Community Facilities District No. 2016-1 (Joshua Ranch Water Supply and Maintenance 80 Services) …………………………………………………………………………………………… B. Defaults in Payment of Debt Service on Bonds Outstanding………………………………………. 81 Community Facilities District No. 91-1 (Sierra Gateway) Special Tax Bonds.……………...... 81 (14) Residential Mortgage Revenue Bond Programs……………………...………………..………....…. 82 (15) Public Employees’ Retirement Systems (PERS) Pension Plan……………………………..……… 82 A. General Information about the Pension Plan……………………………………………..………… 82 B. Net Pension Liability……………………………………………………….…………….…...……. 83 C. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions….……...….. 86

(16) Public Agency Retirement Systems...………………………………………………………...………. 86

(17) Post-Employment Benefits Other Than Pensions-Plan Reporting….……………………………. 87 A. General Information about the Other plan Pensions-Plan.…………………………………………. 87

B. Defined Benefit Plan……………………………………………………………………………… 88

C. Defined Contribution Plan………………………………………………………………………… 92

(18) Permit Held for Development………………………………………………………………………… 93

(19) Successor Agency Trust for Assets of the Former Redevelopment Agency of the City of 93 Palmdale…………………………………………………………………………………………….. A. General Discussion…………………………………………………………………………….…... 93 B. Land Held for Development……………………………………………………………….……… 94 C. Capital Assets…………………………………………………………………………….………… 94 D. Advances Due to Housing Authority – Housing Asset Fund……………………………….……... 95 E. Due to Other Governmental Units…………………………………………………………….…… 96 F. Successor Agency Long-Term Debt……………………………………………………...…….….. 96

39 City of Palmdale Table of Contents to the Notes to the Financial Statements For the Year Ended June 30, 2018

Note Page No. 1. Notes Payable……………………………………………………………….………………. 96 2010 Series A and Series B Refunding Notes………………..……………………………. 96 Dillard’s Infrastructure Note Payable……….…………….……………..………….….…. 96 2. Tax Allocation Bonds………………………………………………………………..….…... 97 2002 Tax Allocation Bonds Payable ($5,329,758)………..…………………………...….… 97 2016 Tax Allocation Bonds Payable ($31,490,000)…..…………..………….……………... 97 2016 Tax Allocation Bonds Payable ($41,645,000)……..………..………….……………... 98 3. Change in Long-Term Liabilities…………………………………………………….……... 98 (20) Commitments and Contingencies……….………………………………….…..…………….……… 99 A. Contracts and Purchase Orders………………………………………………….……………..…… 99 B. Grants………………………………………………………………………………………..……… 99 C. Claims and Judgments……………………………………………………………………………… 99 D. Obligations of the Successor Agency Private Purpose Trust Fund……………………………..…. 100 (21) New Accounting Pronouncements…………………………………………………………..……….. 100 (22) Subsequent Event…………………………………………………………………………………….. 101 (23) Restatement of Prior Year Net Position …………………………………………………………….. 101

40 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

I. Summary of Significant Accounting Policies

A. Description of the Reporting Entity

The City of Palmdale (the City) was incorporated on August 24, 1962, under the general laws of the State of California and became a Charter City in 2009. The City operates under a Council-Manager form of government and provides the following services: library, recreational and culture, public improvements, planning and zoning, building and safety, street maintenance, and general administrative services. The City contracts with the County of Los Angeles to provide law enforcement, animal control, limited street maintenance for snow and hazardous materials removal, and emergency services. Fire service is provided by a separate County Fire Protection District and is not under the City’s jurisdiction.

As required by Generally Accepted Accounting Principles (GAAP), the accompanying comprehensive annual financial report includes the financial activities of the City of Palmdale, the primary government, and its component units, legal separate entities for which the City is considered to be financially accountable. The decision to include a potential component unit in the reporting entity is made by applying the criteria set forth by accounting principles generally accepted in the United States of America. The City is considered to be financially accountable for an organization if the City’s governing body is substantially the same as the component unit’s governing body, and there is a financial benefit or burden relationship between the City and component unit, or the City has operational responsibility for a component unit. Additionally, blending would be appropriate if the component unit provides services entirely, or almost entirely, to the City or for the benefit of the City. Lastly, if the component units’ total debt outstanding is expected to be repaid with City resources, blending is also appropriate for the component unit. All of the City’s component units are considered to be blended component units because in all cases the City Council serves as the governing board for each component unit and the City benefits from the use of certain property and improvements as well as a burden in administering the debt service repayment. Blended component units, although legally separate entities, are, in substance, part of the City’s operations, therefore data from these units are reported with the interfund data of the primary government. Management of the City has operational responsibility for each component unit, as it manages the activities of each component unit in a similar manner in which it manages other of its own programs and activities. Additionally, the City is responsible for repayment of debt within the component units using resources of the primary government.

The component units included within the financial reporting entity of the City of Palmdale are the Palmdale Civic Authority (Authority), the Palmdale Financing Authority (PFA), the Industrial Development Authority (IDA), the Housing Authority of the City of Palmdale (Housing Authority), and the Palmdale Community Foundation (Foundation). The component units above are included because they meet the definition provided in the previous paragraph and of the significance of their operational or financial relationships with the City. As such, these entities are presented on a blended basis.

41 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Separate component unit financial statements are issued for the Palmdale Civic Authority, Palmdale Financing Authority, the Housing Authority, and the Palmdale Community Foundation may be obtained from the City’s Website or from the City’s Finance Department, 38300 Sierra Highway, Suite D, Palmdale, CA 93550.

The Palmdale Civic Authority is a joint powers authority organized under Section 6500 et seq. of the California Government Code on May 1, 1976, between the City and the former Community Redevelopment Agency (Agency) for the purpose of acting as a vehicle for financing various projects of the City and the Agency.

The Authority is a distinct legal entity separate and apart from the City and the former Community Redevelopment Agency. The City Council acts as the governing body of the Authority by serving as its board members. The activity of the Authority is reported in the Palmdale Civic Authority Debt Service and Capital Projects Funds.

The Palmdale Financing Authority is a joint powers authority organized under Section 6500 et seq. of the California Government Code on September 26, 2012, between the City and the Housing Authority for the purpose of acting as a vehicle for financing various projects of the City and Housing Authority.

The Palmdale Financing Authority is a distinct legal entity separate and apart from the City and the Housing Authority, and its debts and obligations are not debts or obligations of the City or the Housing Authority. The City Council acts as the governing body of the Palmdale Financing Authority by serving as its board members. The activity of the Palmdale Financing Authority is reported in the Palmdale Financing Authority Debt Service Fund.

The Industrial Development Authority was organized under Section 91500 et seq. of the California Government Code on February 8, 1995, for the purpose of financing industrial development in the City. The IDA works with manufacturers and industrial companies to develop new industrial sites in Palmdale. The IDA is a distinct legal entity separate and apart from the City and the Agency, and its debts and obligations are not debts or obligations of the City or the Agency. The City Council acts as the governing body of the IDA by serving as its board members. There has been no activity in the Industrial Development Authority Fund during the fiscal year.

The Housing Authority of the City of Palmdale was established on April 9, 1997, pursuant to the State of California Health and Safety Code, Section 34200, entitled “Housing Authorities Law.” The Housing Authority was formed for the purpose of working with mobile home parks located in the City. Upon dissolution of the former Redevelopment Agency of the City of Palmdale, the Housing Authority assumed the authority to perform housing functions previously performed by the dissolved Community Redevelopment Agency and all rights, powers, duties, obligations, and housing assets, were transferred to the Housing Authority during FY2011-12. The Housing Authority is a distinct legal entity separate and apart from the City and the Agency, and its debts and obligations are not debts or obligations of the City or the Agency. The City Council acts as the governing body of the

42 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Housing Authority by serving as its board members, along with two public members. The activity of the Housing Authority is reported in the Housing Asset, Mobile Home Parks, Housing Facilities, and Housing Authority Special Revenue Funds.

Palmdale Community Foundation was established on January 1998, and is a non-profit organization, is organized under the California Nonprofit Public Benefit Corporation Law for public purposes. The specific purpose of the Foundation is to receive contributions and donations from the public and to use such contributions and donations to support charitable, literary, and educational activities authorized under Section 501(c)(3) of the Internal Revenue Code, including the support of programs, projects, and activities sponsored by the City of Palmdale. City staff acts as the governing body of the Palmdale Community Foundation by serving as its board members. The Palmdale Community Foundation exists solely for the enhancement of the City of Palmdale programs and the activity is reported as a Special Revenue Fund. The City of Palmdale is the sole corporate member of the Foundation.

The financial statements of the City of Palmdale have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below.

B. Financial Statement Presentation, Basis of Accounting, and Measurement Focus

The accounts of the City are organized on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures/expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are to be controlled.

Government-Wide Financial Statements

The Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities are reported separately from business- type activities and, likewise, the primary government is reported separately from discretely presented component units. The City of Palmdale has no business-type activities or discretely presented component units. Interfund activity, including payables and receivables has been eliminated in the Statement of Activities and the Statement of Net Position.

Interfund services provided are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between

43 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

governmental funds are netted as part of the reconciliation to the Government-Wide presentation. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges for services to customers who purchase, use or directly benefit from goods, services, or privileges provided by a given function, 2) grants and contributions that are restricted to meeting the operational requirements of a particular function and 3) grants and contributions that are restricted to meeting the capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. The Government-Wide Financial Statements are presented using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred outflows of resources, liabilities and deferred inflows of resources (including capital assets, infrastructure assets, and long-term liabilities) are reported in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized as soon as they are earned and expenses are recognized as soon as a liability is incurred, regardless of the timing of related cash flows.

Governmental Fund Financial Statements

Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures, and Changes in Fund Balances for all major funds individually and non-major funds in the aggregate. An accompanying schedule is presented to reconcile and explain the difference in fund balance or equity as presented in these statements to the net position presented in the Government- Wide Financial Statements.

Governmental Fund Financial Statements are presented using the current financial resources measurements focus and the modified accrual basis of accounting. Accordingly, only current assets, current liabilities and deferred inflows of resources are included on the Balance Sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measureable and available to finance expenditures of the current period. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded in the accounting period in which the related fund liability is incurred. However, debt service expenditures are recorded only when payment is due.

Those revenues susceptible to accrual are incremental property taxes, franchise taxes, special assessments, licenses, interest, and charges for services. Sales taxes collected and held by the state at year-end on behalf of the government are also recognized as revenue. All other revenue items are recorded when received in cash.

44 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The City has presented all major funds that qualified as major funds, which included the General Fund, the Housing Authority Housing Asset Special Revenue Fund, Housing Authority Mobile Home Park Special Revenue Fund, and the Streetlighting Assessment District Special Revenue Fund. Not all of the component unit funds are reflected as major funds. Specific fund descriptions and purpose of each fund can be found on page 21 for all major funds. Summarization of all non-major governmental funds is presented under the Other Governmental Funds column. The individual fund statements and descriptions and purpose of the non-major funds can be found on pages 111-112.

Fiduciary Fund Financial Statements

Fiduciary funds are used to account for assets held in a trustee or agency capacity and cannot be used to support the City’s own programs. Trust funds are accounted for using the accrual basis of accounting while the Agency funds report only assets and liabilities and therefore, do not have a measurement focus; however, agency funds use the accrual basis of accounting to recognize assets and liabilities.

The Agency Fund is used to account for receipts and disbursements associated with 1915 Act Assessment Bonds and Special Tax Bonds which are administered by, but are not the liability of, the City.

The OPEB Trust Funds are used to account for the City’s Other Post-Employment Benefits Plans. Employer contributions are recognized when due. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan.

The Successor Agency Private Purpose Trust Fund is used to account for the assets, deferred outflows of resources, liabilities, and activities of the dissolved Community Redevelopment Agency in a trustee capacity to pay obligations of the former Community Redevelopment Agency. Revenues are recognized when allocated in the amount that is necessary to pay the enforceable obligations and obligations are recognized when due and payable and approved by the oversight board.

C. Budgets and Budgetary Accounting

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the capital project funds, which adopt project-length budgets.

The budget process begins in January when budget request forms are distributed to each department. These requests are assembled by the Finance Department and are presented to the City Manager in March. Budget meetings are then held with each department. The proposed budget is presented to the City Council on or before May 31 of each year. The Council holds a public hearing in June and must adopt a final budget by July 1 of each fiscal year. If Council continues the public hearing and/or adoption of the budget beyond June 30, the Finance Department is required to obtain written authorization for the continuation of spending for the new fiscal year at a public meeting of the Council prior to July 1.

45 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the category level. The category level includes salaries and benefits, training and meetings, operating expenditures, contingency, debt service, and capital outlay. Supplemental appropriations during the year must be approved by the City Council if they are over $50,000 or between funds, except for shifts in appropriations relating to personnel changes that may be done administratively by the City Manager. The City Manager can approve budget transfers up to $50,000 within a fund. Supplemental appropriations were made during the year and are reflected in the budgeted numbers contained in the accompanying financial statements. Unexpended appropriations at year-end may be added to the subsequent year’s adopted budget by the Finance Manager with the approval of the City Manager per Council Resolution 92-120, Section 5.

A separate unaudited budgetary report-comparing budget to actual at the category level has been issued for the General Fund, Special Revenue Funds, and Debt Service Funds. Budgetary reports are not prepared for the Capital Projects Funds. This budgetary report is available from the City’s Finance Department, 38300 Sierra Highway, Suite D, Palmdale, California 93550.

Encumbrance accounting is employed in governmental funds. Encumbrances (i.e., purchase orders, contracts, and other commitments) outstanding at year-end are reported as assigned fund balance in the General Fund since they do not constitute expenditures or liabilities and are added to the subsequent year’s adopted appropriations.

D. Cash and Investments

Cash includes amounts in demand deposits and petty cash on hand. Investments include amounts in Federal Agency Securities, Certificates of Deposit, the Local Agency Investment Fund, money market funds, and investment agreements. The U.S. Treasury and Agency Securities were adjusted to fair value based on market prices on June 30, 2018. The Local Agency Investment Fund is reported at the carrying value because the fair value was not materially different. Amounts invested in money market funds and investment agreements are reported at fair value or guaranteed amounts per investment agreement, which is equal to cost as of June 30, 2018.

The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

E. Short-Term Interfund Receivables and Payables

During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds” in the balance sheet.

46 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

F. Advances Between Funds

Non-current portions of interfund loans receivable, reported as advances from other funds, are offset by a restricted fund balance account to indicate that they are not available for appropriation and are not expendable available financial resources.

G. Prepaid Items

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

H. Land Held for Development

Land held for development is recorded at the lower of cost or market in the governmental and fiduciary funds.

I. Permit Held for Development

Permit held for development is held for public benefit and valued at cost. The value of the permit is based on the income approach and the valuation is level 3 based on the lack of an active market.

J. Restricted Assets

Restricted assets represent unexpended proceeds, interest thereon, and bond reserve amounts related to bond anticipation notes, revenue bonds, tax allocation bonds and certificates of participation. The bond resolutions and indentures require that the bond reserves be maintained in amounts equal to the maximum amount of principal and interest to be paid in any single future fiscal year for each issue.

The debt service funds report restricted assets for resources set aside for current and future principal and interest payments on the bonds. The capital projects funds report restricted assets for proceeds of bond issuances, and interest thereon, which are restricted for use in construction. In cases where capital construction is being financed partially by restricted bond proceeds and partially from the City’s own resources, the City typically uses restricted assets first as appropriate opportunities arise, but reserves the right to selectively defer the use of bond proceeds to future projects.

K. Capital Assets

Capital assets, which include property, plant, equipment, and public domain infrastructure assets (e.g., roads, bridges, curbs, and gutters, streets, and sidewalks, drainage systems, and lighting systems), are reported in the applicable governmental columns in the Government-Wide Financial Statements. Capital assets and Intangible assets are defined by the government as assets with an initial, individual cost of more than $5,000 and $125,000 respectively and an estimated useful life in excess of two years. Such assets are recorded at cost where historical costs are available and at an estimated original cost where not historical records exist. Donated capital assets are recorded at acquisition value at the

47 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized.

Capital assets used in operations are depreciated over their estimated useful lives using the straight- line method in the Government-Wide Financial Statements. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the Statement of Net Position. The range of lives used for depreciation purposes for each capital asset class are as follows:

Assets Years Buildings and Structures 50 Improvements other than Buildings 5-10 Machinery and Equipment 5-15 Infrastructure 20-50

L. Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position and the Statement of Fiduciary Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has four items that qualifies for reporting in this category. 1) The deferred charge on refunding reported in the statement of fiduciary net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. 2) The contributions made against the pension liability subsequent to the measurement date. This amount is deferred and will be recognized in the subsequent measurement period of the net pension liability. 3) The results from actual earnings on the pension fiduciary net position that were in excess of the projected earnings, and 4) changes of assumptions.

In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The City has two types of items, one which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: State Mandated Cost Reimbursements and Grant Reimbursements. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The government-wide Statement of Net Position reports deferred inflows resulting from differences between expected and actual experiences. The amount is deferred and recognized as a reduction of pension expense over a defined amortization period of five years.

M. Compensated Absences

It is the City’s policy to permit employees to accumulate earned but unused vacation and administrative leave, and compensatory and floating holiday time. There is no liability for unpaid

48 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the City. All vacation and administrative leave, compensatory and floating holiday time, and associated employer-related salary costs are accrued when incurred in the Government-Wide Financial Statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Compensated absences are generally liquidated by the general fund and various special revenue funds.

N. Pension Plan

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City of Palmdale’s California Public Employees Retirement System (CalPERS) Plans and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Gains and Losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to recognized in future pension expense. The amortization period differs depending on the source of gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

O. Other Postemployment Benefits (OPEB)

For purposes of measuring the net OPEB Liability or Asset, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City of Palmdale Retiree Benefits Plan (“OPEB Plan”) and additions to/deductions from OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the OPEB Plan recognizes benefits when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments, which are reported at amortized cost.

Gains and Losses related to changes in total OPEB asset and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to recognized in future OPEB expense. The amortization period differs depending on the source of gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are

49 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

P. Long-Term Obligations

In the Government-Wide Financial Statements long-term debt and other long-term obligations are reported as liabilities. Bond premiums/discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as charges in the period the cost is incurred.

In the Fund Financial Statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures in the period the cost is incurred.

Q. Fund Balance

In the Fund Financial Statements, governmental funds report fund balance into five components whereby each component identifies the extent to which the City is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The five components of the fund balance are as follows:

Nonspendable: Resources that are 1) not in spendable form, such as inventories, prepaids, long-term receivables, or non-financial assets held for resale, or 2) required to be maintain intact such as an endowment.

Restricted: Resources that are subject to externally enforceable legal restrictions; these restrictions would be either 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or 2) imposed by law through constitutional provisions or enabling legislation.

Committed: Resources that are constrained to specific purposes by a formal action of the City Council, which constitutes the most binding constraint such as an ordinance. The constraint remains binding unless removed in the same formal manner by the City Council. Council action to commit fund balances must occur within the fiscal reporting period while the amount committed may be determined subsequently.

Assigned: Resources that are constrained by the City’s intent to be used for specific purposes, but that are neither restricted nor committed or the residual balance of all other governmental funds except the General Fund. This policy delegates to the Finance Manager the authority to assign fund balances where the City’s intent is for the amounts to be used for specific purposes. This delegation of authority is for the sole purpose of reporting these amounts in the annual financial statements.

50 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Unassigned: Within the General Fund, the residual resources, either positive or negative, in excess of what can be properly classified in one of the other four fund balance categories. Within all other governmental funds, the negative residual resources in excess of what can be properly classified as nonspendable, restricted, or committed.

When expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, the City’s policy is to first apply restricted fund balance. When expenditures are incurred for purposes for which committed, assigned, or unassigned fund balances are available, the City’s policy is to first apply committed fund balance, then assigned fund balances, and finally unassigned fund balance.

R. Deficit Fund Equity

The following funds had a deficit fund balance at June 30, 2018 in the amount indicated:

Non-major Special Revenue Funds:

Federal Funds $ 601,896 SAVES Fund 14,823 State Grants Fund 729,846

Management anticipates that these deficits will be resolved in future years as outstanding reimbursable grants are received.

Housing Authority Mobile Home Park Fund $ 11,947,384

Management anticipates that this deficit will be resolved in future fiscal years as additional operating revenues become available and the Mobile Home Park occupancy levels remain high and consistent each year at the three mobile home parks and also as the promissory note and advances are paid off.

S. Expenditures Exceeding Appropriations

The legal level of budgetary control is at the category level, personnel, training and meetings, operating, capital and debt expenditure level. Budget appropriations approved were reported to the City Council as being paid out of General Fund and funded through transfers in from special revenue funds. The following special revenue funds reclassified transfers out to the expenditure function level of the special revenue fund financial statements to comply with GASB 54 requirements. Funds with expenditures exceeding appropriations were as follows: Gas Tax Fund, Public Safety Fund, Prop A Fund, Prop C Fund, Article 8 Fund, Park Development Fund, Traffic Impact Fund, Drainage Funds, Federal Funds, State Grants Funds, Miscellaneous Grants Fund, Park Assessments Fund, Landscape Maintenance Fund, and Sewer Maintenance Fund.

51 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The following is a summary of the excess of expenditures over appropriations:

General Public Public Cultural & Total Government Safety Services Recreational

Governmental Funds: Gas Tax Fund $ 260, 974 $ 199,184 $ - $ 61,790 $ - Public Safety Fund 631,363 - 631,363 - - Prop A Fund 2,062,740 - - 2,062,740 - Prop C Fund 258,534 - - 258,534 - Article 8 Fund 5,460,486 - - 5,460,486 - Park Development Fund 165,000 65,000 - - 100,000 Traffic Impact Fund 65,000 65,000 - - - Drainage Fund 94,575 52,000 - 42,575 - Federal Fund 66,370 - 66,370 - - State Grants Fund 81,925 - - 81,925 - Misc Grants Fund 42,503 42,503 Park Assessments Fund 108,150 - - - 108,150 Landscape Maintenance Fund 65,000 65,000 - - - Sewer Maintenance Fund 65,000 65,000 - - - 9,427,620$ 9,427,620$ 511,184 740,236 7,968,050 208,150

T. Property Taxes

With the passage of Assembly Bill No. 1197, the City of Palmdale, previously a “no property tax” city began to receive property taxes in fiscal year 1989-90. In addition, the former Community Redevelopment Agency (CRA) received incremental property taxes on property within its project areas over a base-assessed valuation on the date the project area was established. Upon dissolution of the former CRA incremental property tax will be received by the Private Purpose Trust. The Los Angeles County Assessor and Tax Collector perform the duties of assessing and collecting property taxes, respectively. Tax levies cover the period from July 1 to June 30 of each year. All tax liens attach annually on January 1 preceding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property, as it exists on that date. Secured property taxes are levied against real property and are due and payable in two equal installments. The first installment is due on November 1 and becomes delinquent if not paid by December 10. The second installment is due on February 1 and becomes delinquent if not paid by April 10. Unsecured personal property taxes are due on July 1 each year. These taxes become delinquent if not paid by August 31.

U. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

52 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

V. Implemented Accounting Pronouncements

GASB Statement No. 75 – In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Statement No. 75 establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain non-employer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. The provisions in Statement No. 75 are effective for fiscal years beginning after June 15, 2017. The City recognized a restatement to beginning net position on the Statement of Activities. See Foot Note 24 for more information.

GASB Statement No. 81 – In March 2016, GASB issued Statement No. 81, Irrevocable Split– Interest Agreements. The objective of the Statement is to improve financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, the Statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. The Statement requires that a government recognize revenue when the resources become applicable to the reporting period. The Statement is effective for the reporting periods beginning after December 15, 2016, or the 2017-2018 fiscal year. This statement did not have a significant effect on the financial statements.

GASB Statement No. 85 – In March 2017, GASB issued Statement No. 85, Omnibus 2017. The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The Statement is effective for the reporting periods beginning after June 15, 2017, or 2017-2018 fiscal year. This statement did not have a significant effect on the financial statements.

GASB Statement No. 86 – In May 2017, GASB issued Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources— resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The Statement is effective for the reporting periods beginning after June 15, 2017, or 2017-2018 fiscal year. This statement did not have a significant effect on the financial statements.

53 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

(2) Cash and Investments

Cash and investments as of June 30, 2018 are classified in the accompanying financial statements as follows: Statement of Net Position: Cash $ 1,518,058 Investments 173,825,131 Restricted cash and investments 9,105,162 PARS Section 115 - Trust Money Market Funds 1,000,000 185,448,351 Statement of Fiduciary Net Position: Cash 7,408,903 Cash-OPEB Trust Money Market Funds 2,109,344 Investments-OPEB Trust Mutual Funds 3,119,368 Restricted Cash and Investments 15,206,486 27,844,101

Total Cash and Investments $ 213,292,452

Cash and investments as of June 30, 2018 consist of the following:

Cash on Hand $ 25,153 Deposits with Financial Institution 3,208,005 Investments: Pooled $ 181,215,193 Held by Trustees - PARS Section 115 1,000,000 Held by Trustees 22,615,389 Held by OPEB Trust Money Market Fund 2,109,344 Held by OPEB Trust Mutual Fund 3,119,368 210,059,294 Total Cash and Investments $ 213,292,452

A. Investments Authorized by the California Government Code and the City of Palmdale’s Investment Policy

The table on the next page identifies the investment types that are authorized for the City of Palmdale, for the OPEB Trust Fund, and the Pension Stabilization Trust Fund by the California Government Code (or the City of Palmdale’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City of Palmdale’s investment policy, where more restrictive) that addresses interest rate risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements with the City of Palmdale, rather than the general provisions of the California Government Code or the City of Palmdale’s investment policy.

54 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio* in One Issuer**

U.S. Treasury Obligations 5 years None None U.S. Federal Agency Securities 5 years None None Banker's Acceptance 180 days 40% 2% Municipal Obligations 5 years 10% 15% Medium Term Corporate Notes 3 years 10% None Negotiable Certificates of Deposit 5 years 30% None Overnight Bank Investment Pool N/A 10% None Mutual Funds N/A 15% 10% Local Agency Investment Fund (LAIF) N/A None $65,000,000 California Asset Management Program (CAMP) N/A None $65,000,000

*Excluding amounts held by bond trustees that are not subject to California Government Code restrictions **Per Account

The City of Palmdale’s and OPEB Trust Fund investment policy also authorizes Demand Deposits of up to $2,000,000 (and $2,500,000 in the aggregate) with Bank of America or Wells Fargo Bank. As of June 30, 2018, a demand deposit of $462,743 is expected to be expended in a short period of time and is held on behalf of the Successor Agency Private Purpose Trust Fund as cash on hand.

B. Investments Authorized by Debt Agreements

Investment of debt proceeds held by bond trustees are governed by provisions of the trust agreements, created in connection with the issuance of debt (see Note 12) rather than the general provisions of the California Government Code. Certificates of Participation and Revenue Bond indentures specify the types of securities in which proceeds may be invested as well as any related insurance, collateral, or minimum credit rating requirements. Although requirements may vary between debt issues, money market funds, are all required to be investment grade. Guaranteed investment contracts are required to be acceptable to the municipal bond insurer. The fair value of investments is based on the valuation provided by trustee banks.

C. Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The Investment Policy of the City of Palmdale, Section 4.1 and 4.2, provide guidelines for managing risk. One of the ways that the City of Palmdale manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or

55 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018 coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the City of Palmdale’s investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City of Palmdale’s investments by maturity. 12 Month 13-24 25-60 Remaining Maturity (in months) Total or Les s Months Months

Investment Type: Treasury Notes $ 1 4,780,000 $ - $ 4,987,000 $ 9,793,000 Federal Agency Securities 113,719,000 - 50,235,100 63,483,900 Negotiable Certificates of Deposit 4,859,799 - 1,218,998 3,640,801 Local Agency Investment Fund 48,407,749 48,407,749 - -

Held by Trustees: Money Market Mutual Funds 20,563,440 20,563,440 - - Money Market Mutual Funds - PARS Section 115 1,000,000 1,000,000 - - OPEB Trust Money Market Funds 2,109,344 2,109,344 - - OPEB Trust Mutual Funds 3,119,368 3,119,368 - - Local Agency Investment Fund 1,500,594 1,500,594 - -

Total $ 210,059,294 $ 76,700,495 $ 56,441,098 $ 76,917,701

D. Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City of Palmdale’s investment policy, or debt agreements, and the actual rating as of year-end for each investment type:

Minimum Legal Not Required to Investment Type Total Rating be Rated AA+/Aaa* AAA/Aaa* Treasury Notes $ 14,780,000 N/A $ - $ 14,780,000 $ - Federal Agency Securities 113,719,000 N/A - 113,719,000.00 - Certificates of Deposit 4,859,799 AA 4,859,799.00 - - Local Agency Investment Pool 48,407,749 N/A 48,407,748.86 - - Held by Trustee: Money Market Funds 20,563,440 A 20,563,440 PARS Section 115 1,000,000 N/A 1,000,000.00 - - OPEB Trust Money Market Funds 2,109,344 N/A 2,109,344.46 - - Mutual Funds 3,119,368 AAA 3,119,367.71 - - Local Agency Investment Pool 1,500,594 N/A 1,500,594.00 - - Total $ 210,059,294 $ 60,996,854 $ 128,499,000 $ 20,563,440

*Ratings are from S&P & Moody’s, respectively.

56 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

E. Concentration of Credit Risk

The investment policy of the City of Palmdale contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Reportable investments in any one issuer that represent 5% or more of the total City of Palmdale’s investments are as follows:

Issuer Investment Type Reported Amount Federal Home Loan Bank Federal Agency Securities $19,489,400 Federal Farm Credit Bank Federal Agency Securities 24,618,500 Freddie Mac Federal Agency Securities 29,452,000 Federal Ntl Mtg Assoc. Federal Agency Securities 40,159,100

F. Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City of Palmdale’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2018, $4,420,186 of the City of Palmdale’s deposits with financial institutions in excess of federal depository insurance limits was held in collateralized accounts, but not in the name of the City. In addition, as of June 30, 2018, City of Palmdale investments in the following investment types were held by the safekeeping department of the broker-dealer (counterparty) used by the City of Palmdale to buy the securities:

Investment Type Reported Amount Certificates of Deposit $4,859,799 Treasury Notes $14,780,000 Federal Agency Securities $113,719,000

57 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

G. Investment in State Investment Pool

The City of Palmdale is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the City of Palmdale’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City of Palmdale’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on the amortized cost basis.

H. Disclosures Relating to Fair Value of Investments

The City categorized its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

When quoted prices in active markets are available, investments are classified within Level 1. For investments classified within Level 2, the City’s custodians generally use asset market prices derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, broker-dealer quotes and matrix pricing. The City does not have any investments classified with Level 3. Deposits and withdrawals in governmental investment pools, such as LAIF are made on the basis of $1 and not fair value. Accordingly, the fair value measurement of these types of investments is based on an uncategorized input not defined as a Level 1, Level 2, or Level 3 input.

As of June 30, 2018, the City has the following recurring fair value measurements: Fair Value Measurements on a Recurring Basis Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Balance at Identical Assets Observable Inputs Inputs Investments by Fair Value Level June 30, 2018 (Level 1) (Level 2) (Level 3) Treasury Notes $ 14,780,000 $ - $ 14,780,000 $ - Federal Agency Securities 113,719,000 - 113,719,000 - OPEB Trust - Mutual Funds 3,119,368 3,119,368 - - Certificates of Deposits 4,859,799 - 4,859,799 - Total Investments by Fair Value Level 136,478,167 $ 3,119,368 $ 133,358,799 $ -

Investments Measured Using Uncategorized Inputs Local Agency Investment Fund 49,908,343 Money Market Mutual Funds 20,563,440 PARS Section 115 Money Market Mutual Funds 1,000,000 OPEB Trust - Money Market Mutual Funds 2,109,344 Total $ 210,059,294

58 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

I. PARS Section 115 – Pension Stabilization Trust

The City reviewed the City’s obligation to fund the pension obligations and determined that it served the City’s interests to prefund those benefits. In April 2018, the City approved and adopted the Public Agencies Post-Retirement Pension Plan Document and Trust Agreement. The Pension Stabilization Trust is a tax-qualified irrevocable trust, organized under Internal Revenue Code (IRC) Section 115, established to pre-fund pension obligations as described in GASB Statement No. 75. The Plan Discretionary Trustee is U.S. Bank (U.S. Bank has delegated investment management responsibilities to High Mark Capital Management, Inc.), and Public Agencies Retirement Services (PARS) is the Trust Administrator. The City elected the 'Moderately Conservative HighMark PLUS' investment approach with a blended investment objective strategy. The primary objective is to provide current income with capital appreciation as a secondary objective. The Plan’s targeted rate of return is 3.2 percent. The asset allocation ranges for this objective are 0 percent to 20 percent cash source, 50 percent to 80 percent fixed income, and 20 percent to 40 percent equity. The City funded the trust account totaling $1,000,000 in fiscal year 2017-18 of which all was placed in cash money market accounts as of June 30, 2018.

(3) Interfund Transfers

Interfund transfers for the year ended June 30, 2018 were as follows:

Transfer To: Transfer From: Amount Major Funds General Fund Non-Major Funds $ 3,530,764 Housing Authority Housing Asset Fund 35,364 3,566,128

HA Mobile Home Park Fund Housing Authority Housing Asset Fund 2,152

Non-Major Governmental Funds Non-Major Funds 116,117 General Fund 4,468,771 4,584,888

Total Interfund Transfers $ 8,153,168

Transfers resulted from the following transactions:

1) Transferring revenues from the fund that statute or budget requires collecting them to the fund that statute or budget requires expending them.

2) Transferring receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments come due.

3) Using unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

59 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

(4) Interfund Assets/Liabilities

A. Due From/To Other Funds as of Year Ended June 30, 2018 were as follows:

The amounts payable to the General Fund and Non-Major Governmental Funds relate to temporary cash flow loans made to several non-major funds that all are scheduled to be collected in the subsequent year. Payable To: Payable From: Amount Major funds General Fund Non-Major Governmental Funds $ 131,919 General Fund Housing Asset Fund 268,565 Housing Asset Fund Non-Major Governmental Funds 87,513 Total Major Funds 487,997 Non-Major Governmental Funds Non-Major Governmental Funds 1,846,865 Total Due From/To Other Funds $ 2,334,862

B. Advances Due From/To Agency Funds as of June 30, 2018

The amounts payable to the General Fund and due from Agency Funds relate to administrative fees that are scheduled to be collected in the subsequent year and total $186,745.

C. Advances Due From/To Drainage Funds as of June 30, 2018

Beginning in fiscal year ending June 30, 1993, advances were made from the Amargosa, Portal Ridge, and Pearland Drainage funds to cover shortfalls in funding in the Anaverde Drainage Funds. Government code Section 66006 stipulates that developer impact fees shall be kept in a separate fund and earn interest until expended for the purpose for which the fee was originally collected. In accordance with this Government Code Section, interest has been accrued on a monthly basis with a rate equal to the monthly LAIF rate since the inception of the advances.

The Drainage Funds financial statements are presented as one combined statement within this report. Due to this presentation, the advances have been eliminated.

Receivable Payable Anaverde Drainage $ - $ 6,636,221 Pearland Drainage 6,636,221 - $ 6,636,221 $ 6,636,221

The repayment of the remaining Pearland loan will be funded from future assessments received by the Anaverde Drainage Fund.

60 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The total fund equity of the individual funds is as follows:

Fund Equity Amargosa Drainage $ 1,048,370 Anaverde Drainage (8,698,100) Big Rock Drainage 85,262 Portal Ridge Drainage 586,803 Pearland Drainage 10,586,617 Littlerock Drainage 84,089 $ 3,693,041

D. Advances Due From Fiduciary Funds as of June 30, 2018

The amounts due from the Private Purpose Trust Funds are advances due to the General Fund, Housing Asset Fund that are approved enforceable obligations of the Successor Agency Trust of the Former Redevelopment Agency of the City of Palmdale and will be paid from future property tax. The amount due from the Agency Funds are advances to Assessment Districts that are scheduled to be collected in the subsequent year.

Payable To: Payable From: Amount

Major funds General Fund Private Purpose Trust Funds $ 378,665 Housing Asset Fund Private Purpose Trust Funds 8,809,422 Total Major Funds 9,188,087 Non-Major Governmental Funds Agency Funds 583,859 Total Due From/To Other Funds $ 9,771,946

E. Interfund Promissory Note Receivable and Payable as of June 30, 2018

The Housing Authority-Mobile Home Parks Fund issued a Promissory Note to the former Redevelopment Low and Moderate Income Housing Fund to generate proceeds to fund additional housing programs. The Promissory Note is to be repaid from the Mobile Home Parks operating revenue when net income is sufficient under the operating agreement. As the result of the dissolution of the Community Redevelopment Agency, the Promissory Note asset was transferred to the Housing Authority Housing Asset Fund. All proceeds from repayment of the Promissory Note must be used in accordance with applicable housing related provisions of Community Redevelopment Law. During fiscal year 2017-2018, the Housing Authority Mobile Home Parks fund paid $845,000 principal and $516,103 interest for a total of $1,361,103 to the Housing Authority Housing Asset Fund. The balance of the Promissory Note as of June 30, 2018 is $11,115,000.

61 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

F. Advances Due From/To Other Funds as of June 30, 2018 Receivable Payable Major Funds Special Revenue Funds: Housing Authority-Housing Asset Fund $ 1,186,001 $ -

Housing Authority-Mobile Home Parks Fund - 1,186,001 Total Major Funds $ 1,186,001 $ 1,186,001

The Housing Authority-Mobile Home Parks Fund has advances due to the Housing Authority- Housing Asset Fund of $1,186,001 resulting from the acquisition and operation of three mobile home parks purchased during fiscal year 2002-2003. Upon acquisition, the Housing Authority assumed the prior park owner’s liabilities which were payable to the former CRA Low and Moderate Income Housing fund and City under the terms of an operating agreement. The operating agreement establishes priorities for the use of revenues from operation of the parks, and provides for repayment of the advances from net income once expenses, debt service, operating, and capital reserve requirements are met. In the interim, additional liabilities and program/project management fees will continue to accrue to the long-term advances due the Housing Authority - Housing Asset Fund if there are shortfalls in expected payment. These advances will be repaid when net income is sufficient under the operating agreement.

(5) Notes Receivable

The City has the following Note Receivables outstanding at the end of June 30, 2018: June 30, 2018 Notes Receivable: General Fund: BAIP $ 5,566 Graffiti 42,327 Federal Home Program 7,090,220 CDBG/NSP Program 1,693,342 Housing Authority Housing Asset Fund: Housing Programs 19,510,031 Total $ 28,341,486

A. City Loans

The City made loans as part of a local business incentive program (BAIP) and loans for Graffiti reimbursement charges. The loan balances are $5,566 for BAIP, $42,327 for Graffiti loan, and $25,065 to Habitat for Humanity loan for predevelopment fees as of June 30, 2018.

B. Federal Home Program Loans

The City provides loans to developers for development and rehabilitation of affordable housing. All loan payments will be used to pay for future program expenditures. The balances of the loans were $7,090,220 as of June 30, 2018.

62 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

C. CDBG/NSP Program Loans

Through the Community Development Block Grant and the Neighborhood Stabilization Program, the City provides subsidies to families for purchase of single family affordable housing. Each year a portion of the loan is forgiven if the participant is compliant or repayment of the loan would be received if the home is sold during the compliance period. The balances of the loans were $1,693,342 as of June 30, 2018.

D. Housing Program

The Housing Program Grants loans for mortgage assistance, mobile home rehabilitation and development of affordable homes. All loan payments will be used to pay for future program expenditures. The balances of the Notes Receivables were $19,510,032 as of June 30, 2018.

(6) Fund Balance Classification

The Fund Balances at June 30, 2018 were classified as follows:

Special Revenue Funds Street HA Lighting Other Total HA Housing Mobile Home Assessment Governmental Governmental General Asset Fund Parks District Funds Funds Nonspendable: Advances $ 378,665 $ - $ - $ - $ - $ 378,665 Deposits and Prepaids 462,463 - - - - 462,463 Permit for Development 10,158,182 - - - - 10,158,182 Note and Liens 72,959 - - - - 72,959 Total Nonspendable 11,072,269 - - - - 11,072,269

Restricted: City Programs 2,236,130 - - - 119,402 2,355,532 Pension Stabilization Program 1,000,000 - - - - 1,000,000 Debt Service - - - - 6,629,840 6,629,840 Public Safety Programs 32,972 - - - 5,308,571 5,341,543 Public Services Programs 237,967 - - 14,948,682 83,381,427 98,568,076 Low and Moderate Income Housing Programs - 54,984,081 79,263 - 10,986,286 66,049,630 Recreation and Culture Programs - 3,104,763 3,104,763 Health and Welfare Programs - - - - 247,747 247,747 Housing Authority Operations - - - - 153,082 153,082 Total Restricted: 3,507,069 54,984,081 79,263 14,948,682 109,931,118 183,450,213

Assigned: Compensated Absences 1,988,311 - - - - 1,988,311 Self Insurance Claims 826,052 - - - - 826,052 Health Insurance 3,996,972 - - - - 3,996,972 Next Year's Budget 5,026,690 - - - - 5,026,690 Total Assigned 11,838,025 - - - - 11,838,025

Unassigned: 35,914,833 - (12,026,647) - (1,346,565) 22,541,621

Total Fund Balance (Deficit) $ 62,332,196 $ 54,984,081 $ (11,947,384) $ 14,948,682 $ 108,584,553 $ 228,902,128

63 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

(7) Joint Ventures

A. Antelope Valley Transit Authority

The City of Palmdale is a member of the Antelope Valley Transit Authority (Authority), a joint powers authority of the County of Los Angeles and the cities of Palmdale and Lancaster. The Authority was formed to provide public transit service to Palmdale and Lancaster. The governing board consists of one person from each member agency. Each member has one vote.

The Authority entered into a “Reimbursement Agreement” with the County of Los Angeles to repay the obligation incurred by the County on their behalf. The Authority is funded in part by revenues allocated to the City and redirected to the Authority and in part by a shared formula based on the level of service provided to the jurisdiction.

Separate financial statements of the Authority are available from the Authority office located at 1031 W. Avenue L-12, Lancaster, California, 93534.

B. Palmdale Recycled Water Authority

As of September 26, 2012, the City of Palmdale became a member of the Palmdale Recycled Water Authority (Authority), a joint exercise of powers agreement between the City of Palmdale and Palmdale Water District. The Authority was formed to jointly study, promote, develop, distribute, construct, install, finance, use, and manage recycled water resources created by the Los Angeles County Sanitation District Nos. 14 and 20 for any and all reasonable and beneficial uses, including irrigation and recharge, and to finance the acquisition and construction or installation of recycled water facilities, recharge facilities, and irrigation systems. The governing board consists of five Directors. The governing body of each Member shall appoint and designate two Directors who shall be authorized to act for and on behalf of the Member on matters within the powers of the Authority. The fifth Director shall be appointed jointly by both Members. The Authority is funded by Member contributions.

Separate financial statements of the Authority are available from the City of Palmdale Finance Department at 38300 Sierra Highway, Suite D, Palmdale, CA 93550.

(8) Risk Management

The City is self-insured and exposed to various risk of loss related to general liability and health, dental, and vision needs of employees. Under the City’s risk management program, the City retains the risk for general liability claims for the first $250,000 per occurrence and carries excess general liability and automobile insurance with total policy limits of $25,000,000. There have been no settlements related to these programs that exceeded insurance coverage in the last three years. The City transitioned to a self-insurance health plan in January 2009 and purchases stop loss coverage for the health benefits program for health claims in excess of $125,000 per covered person. The first claims that exceed the $125,000 specific deductible, whether from a single member or several, are paid by the group’s $60,000 aggregating specific deductible. The City retains the risk for dental and

64 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

vision claims. The health, dental, and vision claims are administered by Benefit and Risk Management Services, Inc., a third-party claims administrator.

The City records estimated liabilities for claims filed or expected to be filed up to the amounts for which it retains risk. Charges to the General Fund and other funds are determined from an analysis of claims costs, and are recorded as expenditures in the various funds.

During fiscal year 2017-2018, $1,703,220 was paid in general liability claims and $260,190 was paid in liability administrative costs. At June 30, 2018, $826,052 was accrued for general liability claims in the Government-Wide Financial Statements. The portion estimated to be due within one year is $250,000 and is calculated based on a three year average of settlements paid during the fiscal year. These accruals, based on the results of an actuarial study, represent estimates of amounts to be paid for reported claims and incurred but unreported claims.

During fiscal year 2017-2018, $1,571,854 was paid in health claims and $462,376 was paid in health administrative costs. At June 30, 2018, $835,152 was accrued for health liability claims in the Government-Wide Financial Statements. The accruals, based on the results of an actuarial study, represent estimates of amounts to be paid for reported claims and incurred but unreported claims. All administrative costs were paid during the fiscal year and no unpaid amounts are due and payable as of June 30, 2018.

During fiscal year 2017-2018, $245,620 was paid in dental and vision claims and $19,513 was paid in dental and vision administrative costs. At June 30, 2018, $85,385 was accrued for dental and vision claims in the Government-Wide Financial Statements. The accruals, based on the results of an actuarial study, represent estimates of amounts to be paid for reported claims and incurred but unreported claims.

The total liability is calculated considering the effects of inflation, recent favorable claim settlement trends, including frequency and amount of payouts, anticipated future investment earnings on funds held to pay losses, and other economic and social factors.

It is the City’s practice to obtain a full actuarial study annually to perform an analysis of the City’s potential liability for the City’s retained risk portions of the various self-insurance programs. The amounts recorded as liabilities represent estimates of amounts to be paid for reported claims, as well as incurred but not reported claims based upon past experience, modified for current trends, and information. While the ultimate amounts of losses incurred through June 30, 2018, are dependent on future developments, the City’s management believes that the aggregate accrual is adequate to cover such losses. The liabilities for general liability claims are reported using a discount rate of 3.0% while a 25.0% margin was added to the estimated health, dental, and vision claims for potential adverse deviation. The estimates do not include any additional provision for administrative expenses associated with the adjudicating or processing the unpaid claims.

65 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Changes in the balances of the City’s claims liabilities for the current and prior fiscal year are as follows: Dental and General Liability Health Claims Vision Claims Total Balance, June 30, 2016 $ 2,053,824 $ 659,481 $ 80,555 $ 2,793,860 Claims Incurred 665,000 1,578,215 244,430 2,487,645 Claims Paid (894,878) (1,519,441) (236,566) (2,650,885) Balance, June 30, 2017 1,823,946 718,255 88,419 2,630,620 Claims Incurred 40,000 1,688,751 242,586 1,971,337 Claims Paid (787,894) (1,571,854) (245,620) (2,605,368) Balance, June 30, 2018 $ 1,076,052 $ 835,152 $ 85,385 $ 1,996,589

Due within one year $ 250,000 $ 835,152 $ 85,385 $ 1,170,537

(9) Unearned Revenue/Unavailable Revenue

Unearned Revenue – Governmental Funds and governmental activities report unearned revenues on the balance sheet in connection with resources that have been received, but not yet earned. Accordingly, this type of unearned revenue is also reported on the Statement of Net Position. At the end of the current fiscal year, the components of unearned revenue were as follows:

General Fund: Fees received for recreational programs not yet held $ 330,845 Fees received for facility rental not yet used 5,071 Fees received for business licenses paid in advance 2,929 Fees received for magazine ads paid in advance 2,781 341,626 Park Development Fund: Fees received for park improvements 53,413

Housing Asset Fund: Lease Revenues received in advance 3,311,000 Total Unearned Revenues for Governmental Funds $ 3,706,039

Unavailable Revenue – Governmental funds also report deferred inflows of resources on the balance sheet in connection with resources that have been earned, but are not yet available to finance expenditures of the current fiscal period. This type of unavailable revenue is unique to governmental funds, since it is tied to the modified accrual basis of accounting. Accordingly, these unavailable revenues are not reported on the Statement of Net Position. At the end of the current fiscal year, the components of unavailable revenue resulting from grant revenue not received with 60-day accrual period were as follows:

66 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Major Funds: General Fund $ 5,481,996 HA Housing Asset Fund 2,777,866 Non-Major Special Revenue Funds: Federal Funds Fund 601,896 Federal Home Program Fund 1,836,919 Community Development Block Grant Fund 314 Measure R Fund 2,894,761 Misc Grants/Developer Contributions 12,241 Proprosition C Fund 1,247,523 SAVES Grant Fund 14,823 State Grants Fund 1,038,712 Total Unavailable Revenue for Governmental Funds $ 15,907,051

(10) Capital Assets

Capital Assets of the City for year ended June 30, 2018, consisted of the following:

Beginning Ending Balance Additions Deletions Balance Capital Assets, Not Being Depreciated Land and Improvements $ 116,605,552 $ 227,115 $ (243,500.00) $ 116,589,167 Construction in Progress 32,725,579 24,436,505 (34,792,341) 22,369,743 Total Capital Assets, Not Being Depreciated 149,331,131 24,663,620 (35,035,841) 138,958,910

Capital Assets, Being Depreciated Buildings and Structures 75,406,243 836,452 - 76,242,695 Improvements Other than Buildings 1,962,853 520,575 - 2,483,428 Machinery and Equipment 14,325,890 1,053,210 (558,761) 14,820,339 Infrastructure 1,046,672,352 32,924,624 - 1,079,596,976 Total Capital Assets, Being Depreciated 1,138,367,338 35,334,861 (558,761) 1,173,143,438

Less Accumulated Depreciation for: Buildings and Structures 19,998,525 1,549,533 - 21,548,058 Improvements Other than Buildings 286,716 211,606 - 498,322 Machinery and Equipment 11,068,789 788,297 (558,761) 11,298,325 Infrastructure 519,600,188 32,770,250 - 552,370,438 Total Accumulated Depreciation 550,954,218 35,319,686 (558,761) 585,715,143

Total Capital Assets, Being Depreciated, Net 587,413,120 15,175 - 587,428,295

Total Capital Assets, Net $ 736,744,251 $ 24,678,795 $ (35,035,841) $ 726,387,205

67 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

For the year ended June 30, 2018, depreciation expense on capital assets was charged to the governmental functions as follows: General Government $ 747,630 Cultural and Recreational 855,264 Community Development 750,565 Public Safety 8,159 Public Services 32,958,067

Total Depreciation Expense $ 35,319,685

(11) Capital Leases

Computer Equipment Lease – On October 1, 2012, the City entered into a five year lease purchase agreement with Holman Capital Corporation to finance the acquisition of computers, servers, and related software. Interest on the lease is payable semi-annual at 2.9% per annum. Lease payments for the year ended June 30, 2018, amounted to $145,554. In October, 2017, the City made a final payment of $143,554, and the account balance with the lessor was fully satisfied. As a result, the City was relieved of the lease obligation in December, 2017.

Canon Copier Lease - On December 23, 2015, the City entered into a five year lease-purchase agreement with Canon Financial Services, Inc. to finance the acquisition of copier machines throughout the City. Interest on the lease is payable monthly at 4.11% per annum.

In July, 2017, the City entered into an additional lease agreement with Canon Financial Services, Inc. to finance the acquisition of a copier machine placed at Legacy Common facility. Interest on the lease is payable monthly at 4.11% per annum for forty-two months.

In May 2018, the City entered into a third lease agreement with Canon Financial Services, Inc. to finance the acquisition of a color copier machine to replace a black and white copier machine that was part of the first five year lease-purchase agreement for general use by multiple departments. Interest on the lease is payable monthly at 4.11% per annum for thirty-two months.

All three lease-purchase agreements are scheduled to terminate simultaneously in December, 2020. Lease payments for the year ended June 30, 2018, amounted to $55,982. At the end of the lease, there is a one dollar buy out cost.

Year Ending June 30, Amount 2019 $ 59,508 2020 59,508 2021 29,754 Total minimum lease payments 148,770 Less amount representing interest (7,618) Present value of minimum lease payments $ 141,152

Energy Efficient Equipment Lease – On June 29, 2016, the City entered into a thirteen year lease purchase agreement with Capital One Public Funding, LLC to finance the acquisition of energy

68 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

efficient equipment. Interest on the lease is payable semi-annual at 3.44% per annum. Lease payments for the year ended June 30, 2018, amounted to $106,246.

Year Ending June 30, Amount 2019 $ 105,246 2020 105,246 2021 105,246 2022-2026 526,226 2027-2029 315,736 Total minimum lease payments 1,157,700 Less amount representing interest (207,213) Present value of minimum lease payments $ 950,487

(12) Long-Term Debt

A. Notes Payable

Section 108 HUD Note Payable – On January 11, 2006, the City issued a Variable Rate Note by entering into the Department of Housing and Urban Development contract for Loan Guarantee Assistance under Section 108 of the Housing and Urban Development Act of 1974. The City received advanced proceeds of $5,000,000 and used the proceeds for property acquisition, relocation, and demolition costs associated with the development of the proposed Senior Center. Interest on the note is equal to .2% above the applicable London Interbank Offered (LIBOR) and is payable semi- annually on February 1, and August 1, beginning February 1, 2006. Principal installments are payable August 1 of each year from 2006 through 2025. The payment schedule detailed below uses a blended interest rate ranging from 4.63% to 5.37% due to the note’s variable interest rate. The balance outstanding as of June 30, 2018 is $2,744,000.

Year Ending Principal Interest Total 2019 $ 280,000 $ 134,895 $ 414,895 2020 294,000 120,972 414,972 2021 309,000 105,879 414,879 2022 325,000 89,733 414,733 2023 342,000 72,475 414,475 2024-2026 1,194,000 99,783 1,293,783

Totals $ 2,744,000 $ 623,737 $ 3,367,737

HOME Loan Note Payable – In December of 2005, the City entered into an agreement with the Department of Housing and Community Development for the State of California HOME Investment Partnerships Program (HOME) to help approve the construction loan closing for the Courson Connection Project. The City has received advanced proceeds of $2,850,000 from HOME and has passed through those funds to the developer, Courson Senior Partners LP, for the construction of the 75 units of Senior Housing in the Courson Connection Project. The repayment of the loan will be over a 55-year term through residual receipts from the Project. As of June 30, 2018, no residual receipts from the project have been received from the developer. Interest on the note is equal to 3%. The outstanding balance as of June 30, 2018 is $2,850,000 with $995,938 of unpaid accrued interest.

69 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

2017 Installment Payable of Streetlight Acquisition ($11,397,102) – During the Fiscal Year 2016- 17, the City of Palmdale submitted a request to acquire street lights from Southern California Edison. In preparation for the acquisition of street lights, the City created a comprehensive inventory of light poles and their locations. Additionally, the City retained Utility Cost Management (UCM) to perform an analysis of the financial feasibility to acquire and maintain the City street lights. One of the key advantages of the street lights ownership is the savings in energy cost by retrofitting the City’s existing street lights into Light Emitting Diode (LED). Retrofitting also provides the City with a greater ability to control future updates as technology develops.

The City has five (5) Streetlight Maintenance Assessment Districts. District No. 1 consists of residential and non-residential developments located throughout the City. It has 144 individual Annexations encompassing approximately 6,441 parcels. District No. 2 includes the Anaverde Master Planned Community, with 1,457 parcels. District No. 3 includes the Ritter Ranch Master Planned Community and has approximately 48 parcels. There are no lights in SLMD 3. District No. 4, similar to District No. 1, consists of residential and nonresidential developments located throughout the City. A new engineering firm took over the annexations in 2010 and started using the term “SLMD 4” to annex in any new projects after that date just to keep track, but legally they are all part of SLMD 1. Both Districts are referred to as SLMD 1/4. District No. 4 has 19 individual Annexations encompassing approximately 54 parcels. District No. 5 includes the approximately 32,790 parcels that were previously covered under the Los Angeles County Lighting Maintenance District No. 1616, and that have been administered by the City since fiscal year 2014/2015.

On August 1, 2017, the City Council approved the Purchase and Sale Agreement between the City of Palmdale and Southern California Edison for the ownership of approximately 17,352 street lights within the five (5) Streetlight Maintenance Assessment Districts limits. In order to finance the acquisition of street lights, the Palmdale Financing Authority and the City of Palmdale entered into an Installment Sale Agreement for $11,397,102 on September 1, 2017. Simultaneously, Opus Bank, a California commercial bank entered into an Assignment Agreement with the Palmdale Financing Authority. As such, the loan is now the City’s loan to OPUS, and no longer a Palmdale Financing Authority loan and receivable.

Opus Bank agreed to purchase the City’s obligations under the Installment Sale Agreement at a purchase price of $11,397,102 at the interest rate of 2.48% per annum. The purchase price paid by Opus Bank is to be used by the City to finance the acquisition of approximately 17,352 street lights from Southern California Edison and to pay the costs related to the preparation, execution and delivery of the Installment Sale Agreement and the Assignment Agreement.

On September 7, 2017, Opus Bank disbursed $157,850 constituting the first advance under the Installment Sale Agreement for payment of costs of the financing transactions, resulting in the available proceeds in the amount of $11,239,252 for the City to acquire the street lights from Southern California Edison. At closing of the Installment Sale Agreement and the Assignment Agreement, dated as of September 7, 2017, the City did not draw any funds from the available proceeds of $11,239,252.

70 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Installment payments are computed based on the amount drawn upon during each six month period and represent the maximum payment assuming all project funds are drawn on the closing date. The 2017 Installment Sale Agreement is payable semi-annually on February 1 and August 1 at the rate of 2.48% per annum. Principal installments are payable August 1 of each year to 2032 commencing August 1, 2019. Up to 10% of outstanding principal can be prepaid every year without prepayment penalty or limitation, as long as such payment is not through refinancing. Such prepayments will be applied against the back end of the amortization schedule. On January 31, 2018, the City made the first interest payment of $1,565.87 on the $157,850 draw related to the cost of financing.

On January 25, 2018, the City drew upon $ 6,869,454 for the acquisition of approximately 10,538 street lights from Southern California Edison. On March 23, 2018, the remaining balance of available proceeds was drawn upon in the amount of $4,369,798, which was used to acquire additional 7,234 street lights from Southern California Edison. As a result of these two advances, all project funds are drawn to its maximum amount of $11,239,252. In accepting the inventory listing provided by Southern California Edison, the City acquired 17,772 street lights in total, which are 420 more street lights than the initial estimate of 17,352.

Pursuant to the Installment Sale Agreement, the City will pledge as collateral the assessments in the City’s Streetlight Maintenance Districts 1, 4, and 5 and use such assessments with the first priority for the repayment of the advances.

Year Ending Principal Interest Total 2019 $ - $ 268,932 $ 268,932 2020 690,870 274,081 964,951 2021 708,004 256,735 964,739 2022 725,563 238,959 964,522 2023 743,556 220,742 964,298 2024-2028 4,003,704 814,243 4,817,947 2029-2033 4,525,405 286,072 4,811,477 Totals $ 11,397,102 $ 2,359,765 $ 13,756,867

2017 On Bill Financing – The City of Palmdale and Southern California Edison (“SCE”) entered into the Energy Management Solution Incentive Application (“EMS Agreement”) with the California Public Utilities Commission (“CPUC”) in May, 2014. After submission of the application, the City has completed installation of energy efficient equipment (“Equipment”) at the sites as set forth in the EMS Agreement. In Decision 12-11-015, the CPUC authorized SCE to provide zero-percent financing for the installation of Equipment, which is to be repaid over a specified period through the City’s electric utility bill (“On-Bill Financing”).

Park Lights Retrofitting ($229,909) - In August 2017, the City entered into an OBF Agreement with SCE for the replacement of Courson Park lights with the Equipment. The Park’s address is 38226 10th Street East, Palmdale, CA 93550. The amount financed is $229,909, and the repayment will be over one hundred twenty (120) months in the amount of $1,916 per month starting in December, 2017. The outstanding balance as of June 30, 2018 is $216,487.

71 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Street Lights Retrofitting – In March 2017, the City entered into four (4) OBF Agreements with SCE for installation of the safety street lights at Sites 1-25, 26-50, 51-75 and Sites 76-105 in accordance with EMS Agreement. The safety street lights are components of the traffic signal infrastructure, and Sites 1-105 consist of the various street lights located throughout the City. The repayment of all four (4) Agreements will be over one hundred twenty (120) months. The first payments were made in January, 2018. The amounts financed and outstanding balances as of June 30, 2018 are as follows:

$20,258 ($278 monthly payment) - The outstanding balance as of June 30, 2018 is $18,588. $100,761 ($1,288 monthly payment) - The outstanding balance as of June 30, 2018 is $93,011. $13,684 ($185 monthly payment) - The outstanding balance as of June 30, 2018 is $12,574. $15,588 ($227 monthly payment) - The outstanding balance as of June 30, 2018 is $14,196.

2018 Habitat for Heroes Development Loan ($268,565) – A Cooperative Agreement, dated as of September 3, 2014, was entered into by and between the City of Palmdale and the Housing Authority of the City of Palmdale. The City of Palmdale is the owner of certain real property located at the northeast corner of Division Street and Avenue R (“Property”). Habitat for Humanity of San Fernando/Santa Clarita, Inc., a California nonprofit public benefit corporation (the “Developer”) proposes to develop on the Property 50 units of single-family housing to be sold at affordable cost to income qualified military veterans (“Project”) with financial assistance from the Housing Authority.

The Housing Authority, the City, and Developer concurrently entered into a Memorandum of Understanding by which the Housing Authority and Developer will negotiate an Affordable Housing Agreement, setting forth the terms and conditions by which the Housing Authority will sell the Property to Developer and carry back the purchase price, and will take a promissory note from Developer for repayment to the Housing Authority of the Project Fees. The City agrees to defer its collection of the Project Fees charged by the City in relation to the Project. The Project Fees include but not limited to park development fee, traffic impact fee, drainage fee, building permit fee, and engineering fee. The total amount of the Project Fees to be paid by the Housing Authority will be determined by the City in accordance with the City’s adopted fee schedules and customary processes.

To implement the Affordable Housing Agreement and facilitate the Project, the Housing Authority agrees to pay the City the fair market value of the Property at $25,000 per acre (“Purchase Price”). The Housing Authority agrees to pay the Purchase Price and the Project Fees to the City in ten equal installments at zero interest, commencing on a date that is one year after the closing of the Housing Authority’s sale of the Property to Developer. Prior to and as a condition of the City’s sale of Property to the Housing Authority, the Housing Authority must execute a promissory note to the City, in a form approved by the City, setting forth the payment terms in this Agreement (“Note”). The Note will be in an original principal amount equal to the Purchase Price of the Property plus the final amount of the Project Fees determined by the City. During the Fiscal Year 2017-18, the City incurred the Project Fees in the amount of $268,565.

72 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

B. Revenue Bonds

2012 Lease Revenue Bonds Payable ($8,695,000) - On December 19, 2012, the Palmdale Financing Authority issued $8,695,000 of Lease Refunding Revenue Bonds (2012 Bonds). Interest on the 2012 Bonds is payable semi-annually on March 1 and September 1 at rates ranging from 2.00% to 4.00% per annum. Principal installments are payable September 1 of each year from 2015 to 2029.

The 2012 Bonds maturing on or after September 1, 2015, are subject to extraordinary mandatory redemption from net proceeds of an insurance, title insurance, condemnation or eminent domain award on any interest payment date, in the amount of principal and accrued interest, to the extent that the City credits these proceeds towards the prepayment of lease payments. The 2012 Bonds maturing on or after September 1, 2023, may be redeemed on or after September 1, 2022, from proceeds of optional lease prepayments made by the City, without premium.

The proceeds of the 2012 Bonds were used to refinance an existing lease and refund the related Certificates of Participation, to satisfy the reserve requirement of the bonds, and pay the costs incurred in connection with the issuance of the bonds.

The 2012 Bonds represent direct, undivided fractional interests in a lease of the City’s Development Services Building and the South Valley WorkSource Center. The City has the right, subject to certain conditions, to substitute alternate property for the above properties, as the property subject to the lease.

The lease agreement requires the City to pay a semi-annual base rental on August 15 and February 15 to the Authority for the use of the facilities through September 2029. The rentals will be used by the Authority to pay principal and interest with respect to the 2012 Bonds as they become due. Title to the land and facilities covered by the lease and the 2012 Bonds is vested in the Authority, for the benefit of the 2012 Bond holders, during the lease term.

Upon completion of the term of the lease and payment in full to the 2012 Bond holders, title to the property shall vest in the City. The City may, on any date, deposit sufficient funds into an irrevocable trust to pay all remaining lease payments, at which time the lease agreement shall cease and terminate and title to the property shall vest in the City.

Year Ending Principal Interest Total 2019 $ 530,000 $ 212,310 $ 742,310 2020 545,000 193,460 738,460 2021 570,000 176,148 746,148 2022 575,000 162,548 737,548 2023 590,000 147,248 737,248 2024-2028 3,235,000 454,177 3,689,177 2029-2030 1,145,000 38,856 1,183,856 Totals $ 7,190,000 $ 1,384,745 $ 8,574,745

73 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

2015 Multifamily Housing Revenue Bonds Payable ($4,235,000) - On September 3, 2015, the Housing Authority of the City of Palmdale issued $4,235,000 of Multifamily Housing Revenue Bonds (2015 Bonds). Interest on the 2015 Bonds is payable semi-annually on December 1 and June 1 at rates ranging from 2.625% to 5.25% per annum. Principal installments are payable June 1 of each year from 2017 to 2045.

The 2015 Bonds maturing on or after June 1, 2026, may be redeemed on or after June 1, 2025, from moneys deposited in the Redemption Fund from any source of available funds, at a redemption price equal to the principal amount of Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium.

The 2015 Bonds maturing on or after June 1, 2025, are subject to extraordinary mandatory redemption from proceeds derived from sale or part of any of the Housing Facilities not elected by the Authority to be deposited in the Repair & Replacement Fund and used for the acquisition and/or construction of improvements and extensions to the Housing Facilities, but instead transferred to the Redemption Fund, at a redemption price equal to the principal amount of Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium, on any date.

The 2015 Bonds maturing on any date, are subject to extraordinary mandatory redemption from insurance proceeds or condemnation proceeds not used for the purpose of repairing or replacing the property damaged, destroyed or taken, and transferred to the Redemption Fund pursuant to the Indenture or from proceeds of any foreclosure action under any of the Deeds of Trust transferred to the Redemption Fund, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium.

The proceeds of the 2015 Bonds were used to finance the acquisition of the Impressions, La Quinta, Park Vista, and Summerwood Apartments (collectively, the “Housing Facilities”) all located within the City of Palmdale, to finance the costs to renovate portions of the Housing Facilities, pay costs related to the issuance of the bonds, and make a deposit to a Bond Reserve Account for the Bonds.

The 2015 Bonds are limited obligations of the Housing Authority of the City of Palmdale and are secured by a first pledge of all of the Net Revenues of the Housing Facilities and by the Trustee’s interest in a Deed of Trust for each of the Housing Facilities. Net Revenues are derived primarily from rents received by the Authority from the operation of the Housing Facilities, less the costs of the operation and maintenance of the Housing Facilities. The 2015 Bonds are payable solely from the Net Revenues and other assets pledged under the Indenture. The 2015 Bonds do not constitute a debt or liability of the City, the State, or any political subdivision thereof, other than the Authority to the limited extent of the pledge.

74 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Year Ending Principal Interest Total 2019 $ 85,000 $ 190,251 $ 275,251 2020 90,000 188,020 278,020 2021 90,000 185,658 275,658 2022 95,000 182,395 277,395 2023 100,000 178,951 278,951 2024-2028 545,000 836,643 1,381,643 2029-2033 675,000 713,285 1,388,285 2034-2038 835,000 548,043 1,383,043 2039-2043 1,070,000 310,275 1,380,275 2044-2045 515,000 40,950 555,950 Totals $ 4,100,000 $ 3,374,470 $ 7,474,470

2017 Lease Revenue Bonds Payable ($17,475,000) - On April 5, 2017, the Palmdale Financing Authority issued $17,475,000 of Lease Revenue Refunding Bonds, Series 2017. Interest on the 2017 Series Bonds is payable semi-annually on November 1 and May 1 at rates ranging from 2.00% to 3.50% per annum. Principal installments are payable November 1 of each year to 2032.

The 2017 Series Bonds maturing on or after November 1, 2028, may be redeemed on or after November 1, 2027, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.

The 2017 Series Bonds are subject to special mandatory redemption as a whole, or in part on any date, from hazard insurance proceeds or condemnation proceeds not used to repair or replace any portion of the Property damaged or destroyed and elected by the Authority, at the discretion of the City, to be used for such purpose, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.

The 2017 Bonds represent direct, undivided fractional interests in a lease of the Palmdale City Hall, Palmdale Main Library, Larry Chimbole Cultural Center, Domenic Massari Park, and Desert Sands Park. The City has the right, subject to certain conditions, to substitute alternate property for the above properties, as the property subject to the lease.

The lease agreement requires the City to pay a semi-annual base rental to the Authority on October 25 and April 25 for the use of the facilities through November 2032. The rentals will be used by the Authority to pay principal and interest with respect to the 2017 Bonds as they become due. Title to the land and facilities covered by the lease and the 2017 Bonds is vested in the Authority, for the benefit of the 2017 Bond holders, during the lease term.

Upon completion of the term of the lease and payment in full to the 2017 Bond holders, title to the property shall vest in the City. The City may, on any date, deposit sufficient funds into an irrevocable trust to pay all remaining lease payments, at which time the lease agreement shall cease and terminate and title to the property shall vest in the City.

75 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Year Ending Principal Interest Total 2019 $ 1,065,000 $ 680,263 $ 1,745,263 2020 1,080,000 642,688 1,722,688 2021 1,095,000 599,188 1,694,188 2022 1,200,000 547,288 1,747,288 2023 1,330,000 484,038 1,814,038 2024-2028 4,650,000 1,623,438 6,273,438 2029-2033 6,075,000 562,606 6,637,606 Totals $ 16,495,000 $ 5,139,506 $ 21,634,506

C. Certificates of Participation

2007 Certificates of Participation Payable ($19,960,000) – On April 12, 2007, the Palmdale Civic Authority issued $19,960,000 of Certificates of Participation (2007 Certificates). Interest on the 2007 Certificates is payable semi-annually on April 1 and October 1 at rates ranging from 5.705% to 6.311% per annum. Principal installments are payable April 1 of each year to 2037. The 2007 Certificates maturing on April 1, 2017 and April 1, 2037, are subject to mandatory sinking fund redemption beginning on April 1 in each year in the amount of the principal component of scheduled lease payments required to be made by the City together with interest accrued thereon, without premium. The 2007 Certificates maturing on or after April 1, 2008, are subject to mandatory redemption from the net proceeds of an insurance, title insurance, condemnation or eminent domain award on any date, in the amount of principal and accrued interest, to the extent that the City credits these proceeds towards the redemption of lease payments. The 2007 Certificates maturing on or after April 1, 2018, may be redeemed on or after April 1, 2017, from proceeds of optional lease prepayments made by the City, without premium.

The 2007 Certificates are subject to extraordinary redemption, in whole, on any date upon the election of the City to do so prior to (a) the commencement of construction of a power generating plant on the property, or (b) the closing of a construction loan to finance a power generating plant on the property, in the amount of principal and accrued interest, to the extent that the City credits these proceeds towards the prepayment of lease payments, without premium. The 2007 Certificates are subject to extraordinary redemption, in whole or in part, on any date on or after April 1, 2010, from the proceeds derived by the City of the sale of all or a portion of the property to the extent that the City credits these proceeds towards the prepayment of lease payments, without premium.

The proceeds of the 2007 Certificates were used to finance the acquisition of certain real property for future use as the site of a power generating plant and for other City uses. The 2007 Certificates represent direct, undivided fractional interests in a lease of the certain property to be the location of a power generating plant as discussed above.

The lease agreement requires the City to pay a semi-annual base rental on September 15 and March 15 to the Authority for the use and occupancy of the property through April 2037. The rentals will be used by the Authority to pay principal and interest with respect to the 2007 Certificates as they become due. Title to the property covered by the lease and the 2007 Certificates is vested in the Authority, for the benefit of the 2007 Certificate holders, during the lease term.

76 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Upon completion of the term of the lease and payment in full to the 2007 Certificate holders, title to the property shall vest in the City. The City may, on any date, deposit sufficient funds into an irrevocable trust to pay all remaining lease payments, at which time the lease agreement shall cease and terminate and title to the property shall vest in the City.

Year Ending Principal Interest Total 2019 $ 465,000 $ 1,025,538 $ 1,490,538 2020 495,000 996,191 1,491,191 2021 525,000 964,952 1,489,952 2022 560,000 931,819 1,491,819 2023 595,000 896,478 1,491,478 2024-2028 3,595,000 3,868,327 7,463,327 2029-2033 4,880,000 2,582,146 7,462,146 2034-2037 5,135,000 834,945 5,969,945 Totals $ 16,250,000 $ 12,100,396 $ 28,350,396

2014 Lease Payable ($25,920,000) - On October 16, 2014, the Palmdale Financing Authority assigned the future lease revenues from the Lease Agreement dated as of October 1, 2014, by and between the City of Palmdale and the Authority, to TPB Investments, Inc., a wholly owned subsidiary of Western Alliance Bank, an Arizona corporation, in exchange for $25,920,000. These funds were used to redeem $25,445,000 of outstanding 2002 Palmdale Civic Authority Certificates of Participation, pay $262,893 of interest on the outstanding 2002 Palmdale Civic Authority Certificates of Participation, and pay financing costs of $212,107.

All future lease payments will be paid to TPB Investments, Inc. by the City of Palmdale in semiannual installments beginning March 1, 2015 through September 1, 2032. The payments will be paid by the City of Palmdale from a first lien on the Park Assessment Fund fees.

Interest on the 2014 Certificates of Participation is payable semi-annually on March 1 and September 1 at 3.72% per annum. Principal installments are payable September 1 of each year through 2032. Certificates of Participation maturing on or after September 1, 2024 are subject to optional redemption at a price of 100% of the principal amount redeemed plus accrued interest.

Year Ending Principal Interest Total 2019 $ 1,035,000 $ 857,367 $ 1,892,367 2020 1,165,000 816,447 1,981,447 2021 1,300,000 770,598 2,070,598

2022 1,350,000 721,308 2,071,308 2023 1,400,000 670,158 2,070,158 2024-2028 7,855,000 2,512,023 10,367,023 2029-2033 9,460,000 905,820 10,365,820 Totals $ 23,565,000 $ 7,253,721 $ 30,818,721

77 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

D. Change in Long-Term Liabilities – Activity for the year ended June 30, 2018 were as follows: Balance at Balance at Due Within June 30, 2017 Additions Retirements June 30, 2018 One Year Compensated Absences Payable: Compensated Absences Payable $ 3,092,137 $ 1,314,492 $ 1,384,789 $ 3,021,840 $ 1,452,650 Total Compensated Absences 3,092,137 1,314,492 1,384,789 3,021,840 1,452,650

Liability Claims (General Fund): Health, Dental and Vision Claims 806,674 1,931,337 1,817,474 920,537 920,537 Liability Claims 1,823,946 955,326 1,703,220 1,076,052 250,000 Total Libilitiy Claims 2,630,620 2,886,663 3,520,694 1,996,589 1,170,537

Leases Payable: Computer Lease 143,473 - 143,473 - - Copier Lease 176,420 14,161 49,429 141,152 54,730 Energy Efficient Lease 990,253 - 39,766 950,487 72,549 Total Leases Payable 1,310,146 14,161 232,668 1,091,639 127,279 Notes Payable: Section 108 HUD Loan 3,012,000 - 268,000 2,744,000 280,000 HOME Loan 2,850,000 - - 2,850,000 - Streetlight Purchase Loan - 11,397,102 - 11,397,102 - SCE Parks Led Retro OBF A-5962 - 229,909 13,422 216,487 22,991 SCE Led Retro OBF A-5806 - 20,258 1,670 18,588 3,340 SCE Led Retro OBF A-5807 - 100,761 7,750 93,011 15,455 SCE Led Retro OBF A-5808 - 13,684 1,110 12,574 2,220 SCE Led Retro OBF A-5809 - 15,588 1,392 14,196 2,728 Toal Notes Payable 5,862,000 11,777,302 293,345 17,345,957 326,735 Bonds Payable: 2012 Lease Revenue Bonds 7,705,000 - 515,000 7,190,000 530,000 2015 Mortgage Revenue Bonds 4,185,000 - 85,000 4,100,000 85,000 2017 Lease Revenue Bonds 17,475,000 - 980,000 16,495,000 1,065,000 2007 Certificates of Participation 16,690,000 - 440,000 16,250,000 465,000 2014 Certificates of Participation 24,470,000 - 905,000 23,565,000 1,035,000 Plus: Deferred Issuance Premiums $17.4M Rev 1,371,782 - 255,558 1,116,224 238,472 Total Bonds Payable 71,896,782 - 3,180,558 68,716,224 3,418,472

Total 84,791,685$ $ 15,992,618 $ 8,612,054 $ 92,172,249 $ 6,495,672

(13) Special Assessment District and Community Facilities District Bonds

None of the Bonds described below constitute indebtedness of the City payable from its general funds, and the City is in no way obligated for their repayment except to the extent of any assessments, or special taxes collected and pledged for their repayment. The City is only acting on behalf of the Bondholders in collecting the assessments and special taxes levied to repay the Bonds, forwarding the collections to the Bondholders and initiating foreclosure proceedings, if necessary. Accordingly, these special assessment and special tax Bonds payable are not recorded as a liability in the accompanying financial statements. The amounts collected and held by the City pending disbursement to the Bondholders are accounted for in an agency fund.

A. Bonds Outstanding

Community Facilities District No. 91-1 (Sierra Gateway) Special Tax Bonds – In December 1991, the City issued $7,970,000 of special tax Bonds. Proceeds were used for the development of

78 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

public improvements for the Sierra Gateway Center, a master-planned, mixed-use business park, which is proposed to ultimately include 2.5 million square feet of industrial, office, and retail buildings. The Bond issue provided for the acquisition of land, acquisition and construction of storm drainage retention facilities, landscaping, and street, water, and utility improvements. As of June 30, 2018, a total of $7,425,000 in Bonds was outstanding. No principal and interest payments are due on the Bonds after the maturity in December, 2016. No additional special taxes will be levied on the property in the Sierra Gateway Community Facilities District No. 91-1.

Community Facilities District No. 93-1 (Ritter Ranch) Special Tax Bonds – In April 1995, the City issued $50,000,000 of special tax Bonds for the design, acquisition and construction of public improvements for a master-planned community known as Ritter Ranch consisting of facility, recreational, school, and commercial uses. As of June 30, 2018, a total of $22,665,000 in Bonds was outstanding for Ritter Ranch Community Facilities District No. 93-1. The principal and interest on the Bonds are to be paid from the collection of special taxes levied on the property in the Ritter Ranch Community Facilities District No. 93-1.

Community Facilities District No. 2003-1 (Anaverde Improvement Area A) Special Tax Bonds – On February 23, 2005, the City issued $28,500,000 of Special Tax Bonds, Series 2005-A and $1,500,000 of Special Tax Bonds, Subordinate Series 2005-B for the acquisition and construction of certain public capital improvements necessary for the development of a 5,200-unit master-planned community known as Anaverde. As of June 30, 2018, a total of $21,570,000 in Series 2005-A Bonds and $710,000 in Subordinate Series 2005-B Bonds was outstanding. The principal and interest on the Bonds are to be paid from the collection of special taxes on the property in the Anaverde Community Facilities District No. 2003-1.

Community Facilities District No. 05-1 (Trade & Commerce Center) Special Tax Bonds – On August 2, 2005, the City of Palmdale issued $5,765,000 of Series A and $1,460,000 of Subordinate Series B Community Facilities District No. 05-1 (Trade and Commerce Center Area) 2005 Special Tax Refunding Bonds to refund a portion of the City’s outstanding 10th Street West Assessment District No. 88-1 Series 1989-A Limited Obligation Improvement Bonds and refund certain outstanding CFD 99-1 (Trade and Commerce Center) special tax bonds. The Subordinate Series B Bonds were converted to Series A Bonds during the 2011-12 Fiscal Year. As of June 30, 2018, a total of $5,820,000 in Series A Bonds was outstanding. The principal and interest on the bonds are to be paid from the collection of special taxes on the property in the Trade & Commerce Center Community Facilities District No. 05-1.

Community Facilities District No. 05-1 (Trade & Commerce Center Area) 2007 Special Tax Refunding Bonds, Series A – On August 23, 2007, the City of Palmdale issued $6,460,000 of Series A Community Facilities District No. 05-1 (Trade and Commerce Center Area) 2007 Special Tax Refunding Bonds to refund a portion of the City’s outstanding 7th Street West Assessment District No. 90-2 Series 1990-A Limited Obligation Improvement Bonds. As of June 30, 2018, a total of $5,625,000 Series A 2007 Bonds was outstanding. The principal and interest on the Bonds are to be paid from the collection of special taxes on the property in the Trade & Commerce Center Community Facilities District No. 05-1.

79 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Assessment District No. 2006-1 (Godde Hills Estates Sewer Improvements) Limited Obligation Improvement Bonds – In November 2006, the City issued $2,220,000 of Special Assessment Bonds for the construction of sewer improvements in the community known as Godde Hills Estates. As of June 30, 2018, a total of $1,310,000 in Bonds was outstanding. The principal and interest on the Bonds are to be paid from the collection of special assessments on the Property in the Godde Hills Estates Sewer Improvements Assessment District No. 2006-1.

Community Facilities District No. 2016-1 (Joshua Ranch Water Supply and Maintenance Services) – On February 3, 2016, the City established the City of Palmdale Community Facilities District 16-1 (Joshua Ranch Water Supply and Maintenance Services) to provide funds to pay the costs of certain water rights and related costs, and costs of certain maintenance services. In connection with the formation of District, the City entered into a Joint Community Facilities Agreement (“JCFA”), dated as of June 1, 2016, with the Antelope Valley-East Kern Water Agency (“AVEK”), CV Communities, LLC, Joshua Ranch 2 Inv, LLC (“JR2”), and Joshua Ranch 3 Inv, LLC (“JR3”). In November, 2015, CV Communities secured entitlements to improve and develop the Property with a residential development to include up to 528 single family dwelling units. On December 23, 2015, ownership of the Property was transferred to JR2 and JR3. Under the JCFA as of June 1, 2016, CV Communities assigned to AVEK its rights to 567 acre-feet per year of water, including without limitation the right to all groundwater return flow resulting therefrom.

The special taxes are authorized to be levied on the Property for the purpose of (i) paying the annual purchase price of the Assigned Water Rights and other related and allocable charges to be paid by AVEK, (ii) paying the expenses of the City in administrating the CFD, (iii) paying the expenses of AVEK relative to its obligations under this agreement and otherwise with respect to the Assigned Water Rights, including but not limited to wheeling costs, and any costs associated with water banking by AVEK, (iv) paying an energy charge to AVEK based on California Department of Water Resources charges to transport water from the Tupman Turnout to AVEK’s water treatment plant, (v) paying energy charges incurred by the City related to banked water, and (vi) establishing and replenishing a reserve fund to be maintained by the City and to be drawn upon if the special taxes revenues collected by the City for the CFD in any fiscal year are not sufficient to pay the Annual Water Rights Charges, the AVEK Administrative Expenses and the AVEK Energy Charges due and payable in any fiscal year.

Under the Assignment Agreement between AVEK and CV Communities, AVEK will timely perform all the AVEK Obligations (as defined in the Assignment Agreement) on and after January 1, 2017 as they apply to the Assigned Water Rights and the City Water Allocation. CV Communities is obligated to pay the Annual Water Rights charges, and AVEK Administrative Expenses and any AVEK Energy Charges payable in calendar year 2017 (collectively, the “2017 Expenses”). In order to assure the City that the foregoing payments will be made, CV Communities provided the City with a Letter of Credit issued by Wells Fargo Bank on June 10, 2016. The City is entitled to draw on the amount available under the Letter of Credit in the event that CV Communities does not timely pay all of the 2018 Expenses. The current Letter of Credit was renewed in June, 2018 and is effective through June 12, 2019. As of June 30, 2018, a total of $379,491 in Letter of Credit was outstanding.

80 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

B. Defaults in Payment of Debt Service on Bonds Outstanding

Community Facilities District No. 91-1 (Sierra Gateway) Special Tax Bonds – On December 1, 1997, there were insufficient funds on hand to make the full payment of the scheduled principal and interest on the Community Facilities District No. 91-1 Bonds due to delinquencies within the District. In accordance with procedures for Community Facilities Districts (which are different from those for Assessment Districts), payments of interest only were made proportionally to the Bondholders as listed in the table below. During fiscal year 2015-16, foreclosure proceedings were initiated against the owner of Defaulted Properties. During the fiscal year 2016-17, the City, on behalf of CFD 91-1, obtained judgments against the property owner of the Defaulted Properties (“Property”). The Property went to a foreclosure sale on September 28, 2016, but no bids were received. The County of Los Angeles’ Treasurer and Tax Collector office (“TTC”) also conducted ad valorem foreclosure sale with respect to the Defaulted Properties. This foreclosure sale also failed.

During the Fiscal Year 2017-18, the owner of non-defaulted properties within the District has permanently satisfied the District special taxes attributable to such parcels. Accordingly, the City took the necessary actions to release the special tax lien imposed for the District on three non- defaulted parcels in June, 2018.

As part of ongoing efforts to resolve the delinquency, the City met with Los Angeles County TTC officials at the City facility on August 29, 2018. There was an agreement in principal that Los Angeles County TTC office will seek Board of Supervisors’ approval of (i) cancellation of delinquent Ad Valorem Taxes levied against Property pursuant to Cal. Rev. and Tax Code section 4986.3 in connection with a deed in lieu of Property to the City, and (ii) County CFD’s pro rata distribution of proceeds from sale of Property via bankruptcy proceeding (net of costs) on aggregate debt outstanding in complete satisfaction of County judgment and delinquent special taxes.

The Los Angeles County TTC officials were interested in a proposed timeline and the City’s plan for the Property. The Plan is to market and sell the property and distribute proceeds to bondholders in complete satisfaction of amount owed under the Bonds, have the Property developed and paying taxes again. They also went out and visited the Property after the meeting.

Fiscal Year Interest Fiscal Year Interest 1997-1998 $ 241,881 2007-2008 $ 142,787 1998-1999 148,474 2008-2009 141,179 1999-2000 148,283 2009-2010 147,131 2000-2001 123,693 2010-2011 149,729 2001-2002 141,376 2011-2012 154,943 2002-2003 130,703 2012-2013 158,128 2003-2004 129,454 2013-2014 160,207 2004-2005 126,712 2014-2015 161,823 2005-2006 140,404 2015-2016 164,925 2006-2007 144,418 2016-2017 137,100 2017-2018 128,454 Totals $ 3,121,804

81 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

(14) Residential Mortgage Revenue Bond Programs

The Multifamily Mortgage Program is designed to provide funds for the construction and permanent financing of apartment complexes. Bonds are paid from monthly rental payments generated by the development and from remaining bond proceeds held by Wells Fargo. As of June 30, 2018, there was $941,830 of Multifamily Mortgage Revenue Bonds outstanding.

The bonds described above do not constitute indebtedness of the Housing Authority or the City, and there exists no legal or moral obligation on the part of the Housing Authority or the City to make payments on such bonds from any source other than the revenue and assets pledged thereto. The program is completely administered by the trustees. Accordingly, these programs and the mortgage revenue bonds issued there under have been excluded from the accompanying financial statements.

(15) Public Employees’ Retirement System (PERS) Pension Plan

A. General Information about the Pension Plan

Plan Description –All qualified permanent and probationary employees are eligible to participate in the City’s Miscellaneous Plan, an agent multiple employer defined benefit pension plan administered by the California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan is established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided – CalPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is the Basic Death benefit and the 1959 Survivor Benefit. The cost of living adjustments is 2 percent and applied as specified by the Public Employees’ Retirement Law.

82 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The Plan’s provisions and benefits in effect at June 30, 2018, are summarized as follows:

Between On or Prior to April 11, 2011 and On or after Hire Date April 10, 2011 December 31, 2012 January 1, 2013 Formula 2.7% @ 55 2% @ 60 2% @ 62 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50-55 50-63 52-67 Monthly benefits, as a % of annual salary 2.0% to 2.7% 1.092% to 2.418% 1.0% to 2.5% Required employee contribution rates 8.00% 7.00% 6.25% Required employer contribution rates 10.439% 10.439% 10.439% Employees Covered – At June 30, 2018, the following employees were covered by the benefit terms for each Plan: Between April 11, 2011 and On or after On or Prior to December 31, January 1, April 10, 2011 2012 2013 2.7% @ 55 2% @ 60 2% @ 62

Inactive employees or beneficiaries currently receiving benefits 228 Inactive employees entitled to but not yet receiving benefits 238 Active employees 148 11 37 Total 614 11 37

Contributions – Section 20814(c) of the California Public Employees’ Retirement law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in rate. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rates of employees. For the measurement period ending June 30, 2017 (the measurement date), the average active employee contribution is 7.956 percent of annual pay, and the employer’s contribution rate is 10.439 percent of annual payroll plus an Employer Unfunded Accrued Liability contribution of $2,014,661. The employer and employee contributions totaled $3,509,493 and $1,092,160, respectively.

B. Net Pension Liability

The City’s net pension liability for the Plan was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2016, rolled forward to June 30, 2017.

83 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Actuarial Assumptions – The total pension liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions. Valuation Date June 30, 2016 Measurement Date June 30, 2017 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 7.15% Inflation 2.75% Payroll Growth 3.0% Projected Salary Increase 3.2% - 12.2% (1) Investment Rate of Return 7.50% (2) Society of Actuaries Scale BB Mortality (3)

(1) Depending on age, service and type of employment (2) Net of pension plan investment expenses, including inflation (3) The mortality table used was developed based on CalPERS' specific data.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2016 valuation were based on the 2014 CalPERS actuarial experience study for the period of 1997 to 2011. Further details of the Experience Study can be found on the CalPERS website.

Change of Assumptions – For the June 30, 2017 measurement date, the accounting discount rate was reduced from 7.65 percent to 7.15 percent.

Discount Rate - The discount rate used to measure the total pension liability was 7.15 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the current 7.15 percent discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.15 percent is applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB Statement 68 section.

The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, staff took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-

84 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

Target Real Return Real Return 1 2 Asset Class Allocation Years 1-10 Years 11+ Global Equity 47.00% 4.90% 5.38% Fixed Income 19.00% 0.80% 2.27% Inflation Assets 6.00% 0.60% 1.39% Private Equity 12.00% 6.60% 6.63% Real Estate 11.00% 2.80% 5.21% Infrastructure and Forestland 3.00% 3.90% 5.36% Liquidity 2.00% -0.40% -0.90% Total 100%

1An expected inflation of 2.5% used for this period 2 An expected inflation of 3.0% used for this period

Changes in the Net Pension Liability – The changes in the Net Pension Liability for the Plan for the measurement date June 30, 2017, are as follows:

Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balance at June 30, 2017 $ 150,311,831 $ 109,084,138 $ 41,227,693 Changes in the year: Service cost 2,601,354 2,601,354 Interest on the total pension liability 11,018,183 11,018,183 Changes in assumptions 9,269,931 9,269,931 Differences between expected and Actual Experience (3,510,853) (3,510,853) Contribution - employer 5,157,320 (5,157,320) Contribution - employee 1,165,598 (1,165,598) Net investment income 12,177,480 (12,177,480) Benefit payments, including refunds of employee contributions (6,542,229) (6,542,229) - Administrative expenses (161,055) 161,055 Net changes 12,836,386 11,797,114 1,039,272 Balance at June 30, 2018 $ 163,148,217 $ 120,881,252 $ 42,266,965

85 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents the net pension liability of the Plan, as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate. Discount Rate - Current Discount Discount Rate 1% (6.15%) Rate (7.15%) +1% (8.15%)

Plan's Net Pension Liability $ 64,695,790 $ 42, 266,965 $ 23,754,606

Pension plan fiduciary net position: Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial report which can be obtained from the CalPERS website.

C. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions

For the year ended June 30, 2018, the City recognized pension expense of $5,547,263. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Contributions made subsequent to the measurement date $ 3,509,493 $ - Changes in assumptions 5,407,461 - Differences between expected and actual experiences (2,206,012) Net differences between projected and actual earnings on plan investments 1,629,072 - Total $ 10,546,026 $ (2,206,012)

The amount of $3,509,493 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year ended June 30 2019 $ 2,239,054 2020 2,799,020 2021 674,250 2022 (881,803) $ 4,830,521

(16) Public Agency Retirement Systems

For all of its part-time employees not covered by PERS, a defined contribution pension plan is made available through the Public Agency Retirement System (PARS) pursuant to the requirements of 3121(B)(7)(F) of the Internal Revenue Code. This was created in accordance with Internal Revenue

86 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Code Sections 401(a) and 501 and administered by Phase II Systems. Benefit terms, including contribution requirements for PARS are established by Internal Revenue Code 3121(b)(7)(F). Employees are required to contribute 7.5 percent of their salary to the pension plan, up to applicable Internal Revenue Code limits. The City does not contribute to Employees PARS account. Employees are immediately vested in their contributions and earnings on those contributions. For the year ended June 30, 2018, employee contributions amount was $233,481.

The City is required to contribute 3.75 percent of the elected Council Members annual salary to the individual account. The individuals are immediately vested in their own and the City’s contributions and earnings on those contributions. For the year ended June 30, 2018, employee and employer contributions amount was $2,049.

(17) Post-Employment Benefits Other Than Pensions

A. General Information about the Other Than Pensions-Plan (OPEB)

Plan Description:

The City of Palmdale Retiree Health Program (Plan) is a single-employer plan that consists of a defined benefit healthcare plan and a defined contribution plan that is used to provide postemployment healthcare benefits other than pensions (OPEB) to eligible retirees. Management of the plan is vested with the Finance Manager, Human Resources Manager and Director of Administrative Services. The City is the trustee over the plan with fiduciary oversight and authority over the operations and management of the Trust.

On January 1, 2009, the City of Palmdale adopted a single employer defined benefit, as well as a single employer defined contribution Other Post Employment Benefit (OPEB) healthcare plan. The plans are administered by Benefit and Risk Management Services, Inc. of Folsom, California. To receive a post-employment health care benefit, an eligible or vested employee must retire from the City on or after attaining age 50 with at least five years of service and elect retiree health benefits within 120 days of separation. Retirees who opt out of the health plan may re-enroll under eligible qualifying events.

Beginning January 1, 2009, the City through local resolution amended the post-employment health care benefits and offered two benefit options to current retirees and to full-time employees employed at December 31, 2008. The options included a defined contribution option and defined benefit option. All full-time employees hired after December 31, 2008 are not eligible for any post-employment benefits. The City of Palmdale retains the authority and may elect at any time to amend post- employment health care benefits through local ordinance or resolution. Contributions are not currently required to be made by employees for either of the plans. The Plan does not issue a publicly available report.

87 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

B. Defined Benefit OPEB Plan

Funding Policies:

Plan membership - At June 30, 2018, the Defined Benefit Plan membership consisted of the following:

Inactive plan members or beneficiaries currently receiving benefit payments 23 Inactive plan members entitled to but not yet receiving benefit payments 0 Active plan members 12 Total 35

Benefits provided - The Plan provides medical insurance benefits to eligible retirees. Current retirees receive a maximum of $250 deposited into the Plan per month beginning January 1, 2009. Employees age 45 and greater on December 31, 2008 and choose a defined benefit plan of $250 per month at retirement, will receive either a maximum contribution of $250 per month or a pro-rated contribution for less than 10 years of service.

Contributions - The contribution requirements of the plan members and the City are established as described above under each plan and may be amended by the City Council. The Council establishes rates based on an actuarially determined rate. For the year ended June 30, 2018, the City was not required to make a contribution to the defined benefit plan for current premiums.

Investment Policy - The Defined Benefit Plan’s policy in regard to the allocation of invested assets is established and may be amended by the City Council. It is the policy of the City Council to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio across a broad selection of distinct asset classes. The investment policy applies to the investment of all cash and various funds of the City as identified in the adopted budget document for the purpose of funding the City OPEB liability.

Investment strategies for Retiree Defined Benefit – Health Premium Supplement Plan (HPS) are as follows: Asset Class Target Allocation Domestic equity 40.00% International equity 10.00% Fixed income 40.00% Real estate and alternative 0.00% Cash and equivalents 10.00%

Total 100.00%

Concentrations - The Plan adheres to the investment policy for concentrations and types of investments.

Rate of Return - For the year ended June 30, 2018, the annual money-weighted rate of return on investments, net of investment expense was 10.31 percent. The money-weighted rate of return

88 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018 expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Net OPEB Liability (Asset)

The City’s net OPEB liability (Asset) was measured as of June 30, 2018, and the total OPEB liability (Asset) used to calculate the net OPEB liability (Asset) was determined by an actuarial valuation as of June 30, 2016.

Actuarial assumptions - The total OPEB liability was determined by an actuarial valuation as of June 30, 2016, rolled forward to June 30, 2018, using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Valuation Date June 30, 2016 Measurement Date June 30, 2018 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 6.50% Investment Rate of Return 6.50% (1) General Inflation 2.75% Healthcare Cost Trend Rate 6.0% for FY2019, gradually decreasing over several decades to an ultimate rate of 4.4% in FY2075 and later years. In addition, the medical trend rates above were increased to reflect the projected effect of the Affordable Care Act's Excise Tax on high-cost health insurance plans. The additional trend rate adjustments vary by year, but average 0.38% beginning calendar year 2030 for plans other than Medicare plans. (1) Net of OPEB plan investment, including inflation

Mortality rates were based on assumptions for Public agency Miscellaneous members used in the June 30, 2015 CalPERS actuarial valuation.

The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which best–estimates of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These asset class estimates are combined to produce the portfolio long-term expected rate of return by weighting the expected future real rates of return by the current asset allocation percentage (or target allocation, if available) and by adding expected inflation (2.75%). All results are then rounded to the nearest quarter percentage point.

89 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

The best-estimates of expected future asset class returns were published in the 2016 Survey of Capital Market Assumptions produced by Horizon Actuarial Services. These expected returns, along with expected asset class standard deviations and correlation coefficients, are based on Horizon’s annual survey of investment advisory firms. The expected inflation assumption was developed based on an analysis of historical experience blended with forward-looking expectations available in market data.

Best-estimates of geometric real and nominal rates of return for each major asset class included in the OPEB plan’s asset allocation as of the measurement date are summarized in the following table: Long-Term Estimated Long- Expected Real Rate Asset Class Term Allocation of Return Domestic equity 40.00% 5.39% International equity 10.00% 5.20% Fixed income 40.00% 1.98% Real estate and alternatives 0.00% 4.25% Cash and equivalents 10.00% 0.79% Total 100.00%

Note 1 – Nominal rates of return are equal to real rates of return plus the assumed inflation rate.

Discount rate - The discount rate used to measure the total OPEB liability was 6.5 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the to the total OPEB liability.

Changes in the Net OPEB Liability (Asset): OPEB Plan Increase (Decrease) Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability/(Asset) Balance at June 30, 2017 $ 731,522 $ 1,393,400 $ (661,878) Changes in the year: Service Cost 9,801 - 9,801 Interest 41,817 - 41,817 Differences between expected and actual experience 117,475 - 117,475 Net investment income - 122,424 (122,424) Administrative expenses - (42,234) 42,234 Benefit payments, including refunds of employee contributions (195,980) (195,980) - Net changes (26,887) (115,790) 88,903 Balance at June 30, 2018 $ 704,635 $ 1,277,610 $ (572,975)

Plan net position as a percentage of the total pension liability 181.3%

90 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Sensitivity of the net OPEB liability (asset) to changes in the discount rate - The following presents the net OPEB liability (asset) of the City, as well as what the City’s OPEB liability (asset) would be if it were calculated using a discount rate that is 1 percentage point lower (5.5 percent) or 1 percentage point higher (7.5 percent) than the current discount rate: 1% Decrease Current Discount Rate 1% Increase 5.50% 6.50% 7.5%

Net OPEB liability (asset) ($513,474) ($572,975) ($625,199)

Sensitivity of the net OPEB liability (asset) to changes in the healthcare cost trend rates - The following presents the net OPEB liability (asset) of the City, as well as what the City’s net OPEB liability (asset) would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower (8.5 percent decreasing to 4.5 percent) or 1 percentage point higher (10.5 percent decreasing to 6.5 percent) than the current healthcare cost rates: 1% Decrease Current Healthcare 1% Increase (8.5% Cost Trend Rates (10.5% decreasing to (9.5% decreasing decreasing to 4.5%) to 5.5%) 6.5%)

Net OPEB liability (asset) ($583,626) ($572,975) ($560,560)

OPEB Expense and Deferred Outflows/Inflows of Resources related to OPEB:

For the Year ended June 30, 2018, the City recognized OPEB expense of $24,020. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $ 101,068 $ - Net differences between projected and actual investment earnings - 36,185 Total $ 101,068 $ 36,185

Other amount reported as deferred outflows of resources related to OPEB will be recognized as future OPEB expense as follows: Deferred Outflows / Measurement Period (Inflows) of Resources Year ended June 30, Amount 2019 $ 7,361 2020 7,361 2021 7,361 2022 7,360

2023 16,407

Thereafter 19,033 Total $ 64,883

91 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

C. Defined Contribution OPEB Plan

Plan membership - At June 30, 2018, the Defined Contribution OPEB Plan membership consisted of the following: Inactive plan members or beneficiaries currently receiving benefit payments 7 Inactive plan members entitles to but not yet receiving benefit payments 0 Active plan members 107 Total 114

Benefits provided - Full time employees under age 45 on December 31, 2008 and employees aged 45 and greater who choose a defined contribution option will receive a defined contribution account. Annual allocations begin at $100 and increase with age up to a maximum $2,000 annual allocation. Individual balances grow with investment earnings and annual City contributions. Beginning account balances were determined based on years of service, annual benefit times the life annuity factory at expected retirement age. Annual contributions for the beginning account balances and the annual contribution is made when the employee is fully vested as described above.

Contributions - The contribution requirements of the plan members and the City are established as described above under the defined contribution plan and may be amended by the City Council. Currently, plan members and beneficiaries are not required to contribute to the plan. For the year ended June 30, 2018, the City contributed $152,400 to the Defined Contribution Plan.

Condensed Financial Statements:

Separate GAAP-basis reports are not currently available for the defined benefit and contribution plans. In lieu of separate issued financial statements for the City administered post-employment health care benefit trust funds, condensed financial statements are presented below for the year ended June 30, 2018:

Statement of Fiduciary Net Position June 30, 2018 OPEB Trust OPEB Trust Defined Defined Benefit Plan Contribution Plan Total Assets: Money Market funds $ 87,352 $ 2, 021,992 $ 2,109,344 Investments: Mutual Funds 1,354,324 1,765,044 3,119,368 Total Assets 1,441,676 3,787,036 5,228,712

Liabilities: Accounts Payable 164,066 - 164,066 Total Liabilities 164,066 - 164,066

Total Net Position Restricted for OPEB Benefits $ 1,277,610 $ 3,787,036 $ 5,064,646

92 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Statement Changes in Fiduciary Net Position For the Year Ended June 30, 2018

OPEB Trust OPEB Trust Defined Defined Benefit Plan Contribution Plan Total Additions: Employer Contributions to Retiree Medical Trust $ - $ 164,177 $ 164,177 Investment and interest income 73,637 97,449 171,086 Net Realized and Unrealized Gains (Losses) 48,787 33,747 82,534 Total Additions (Deletions) 122,424 295,373 417,797

Deductions: Benefits paid to participants 238,214 145,428 383,642 Total Deductions 238,214 145,428 383,642

Change in Net Position (115,790) 149,945 34,155 Net Position Held in Trust as July 1, 2017 1,393,400 3,637,091 5,030,491 Net Position Held in Trust as June 30, 2018 $ 1,277,610 $ 3,787,036 $ 5,064,646

(18) Permit Held for Development

In FY 2006-07, the City began a process to obtain a permit for the construction of an electrical power plant within the City’s boundaries. All permits needed to allow construction of the Project have been obtained by the City. In May 2013, the City entered into a purchase and sale agreement with a developer to purchase all rights and assets pertaining to the Palmdale Hybrid Power Project and on April 30, 2015 the City transferred all rights to the project that consist of all permits, contracts and other governmental approvals in the project. The City has spent a total of $10,158,182 on the permit process and does not anticipate any substantial additional cost to complete the process. Construction is anticipated to begin in 2019 and the Project should be in operations by mid-2022. The Permit Held for Development is reported on the Statement of Net Position and the Governmental Funds Balance Sheet.

(19) Successor Agency Trust for Assets of the Former Redevelopment Agency of the City of Palmdale

A. General Discussion

On December 29, 2011, the California Supreme Court upheld Assembly Bill X126 (“the Bill”) that provides for the dissolution of all Redevelopment Agencies in the State of California. This action impacted the reporting entity of the City of Palmdale that previously had reported a Redevelopment Agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a Redevelopment Agency, either the City or another unit of local government will agree to serve as the “Successor Agency” to hold the assets until they are distributed to other units of state and local government. On January 4, 2012, the City Council elected to become the Successor Agency for the former Redevelopment Agency in accordance with the Bill as part of City Resolution Number CC 2012-002.

93 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

After enactment of the law, which occurred on June 28, 2011, Redevelopment Agencies in the State of California cannot enter into new projects, obligations, or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).

Successor Agencies are only allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former Redevelopment Agency until all enforceable obligations of the prior Redevelopment Agency have been paid in full and all assets have been liquidated.

B. Land Held for Development

Land held for development is recorded at the lower of acquisition cost or estimated fair market value. During fiscal year 2010-2011, properties were conveyed to the City pursuant to Section 33220(g) of the Health and Safety Code to provide redevelopment and retain local control. As a result of AB1484, the same properties were reconveyed back to the Successor Agency Trust Fund through a quitclaim process on November 9, 2012. The reconveyance was legally deemed to be reported as of June 30, 2015. Land Held for Development was transferred at a carrying value of $11,673,527. After the sale of land in accordance with the Successor Agency’s Long Range Property Management Plan, the carrying value of remaining land held is $6,540,933 as of June 30, 2018, and is reported on the Successor Agency Private Purpose Trust Fund financial statements.

C. Capital Assets

Capital Assets of the Successor Agency Trust Fund for the year ended June 30, 2018 consisted of the following: Private Purpose Trust Fund: Beginning Balance Additions Deletions Ending Balance Capital Assets, Not Being Depreciated Land and Improvements $ 3,861,891 $ - $ - $ 3,861,891 Construction in Progress 1,987,118 - - 1,987,118 Total Capital Assets, Not Being Depreciated 5,849,009 - - 5,849,009

Capital Assets, Being Depreciated Buildings and Structures 438,152 - - 438,152 Total Capital Assets, Being Depreciated 438,152 - - 438,152

Less Accumulated Depreciation for:

Buildings and Structures 209,612 8,763 - 218,375 Total Accumulated Depreciation 209,612 8,763 - 218,375

Total Capital Assets, Being Depreciated, Net 228,540 (8,763) - 219,777

Total Capital Assets, Net $ 6,077,549 $ (8,763) $ - $ 6,068,786

94 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

For the year ended June 30, 2018, depreciation expense on capital assets was charged to the private purpose trust fund in the amount of $8,763.

D. Advances Due to Housing Authority-Housing Asset Fund Receivable Payable Major Governmental Funds: Housing Authority - Special Revenue Funds: Housing Authority - Housing Asset Fund $ 8,809,422 $ - Successor Agency Trust Fund: Dissolved - CRA Project Areas No. 1 and No. 2A - 8,809,422 Total $ 8,809,422 $ 8,809,422

In fiscal years 2004-2005 and 2005-2006, the State required the former Community Redevelopment Agency (CRA) to shift tax increment of $1,862,827 to the Education Revenue Augmentation Fund (ERAF). To assist in funding this shift, the former CRA Housing Development fund advanced $355,538 and $1,507,289 (50% of the total requirement) to the former CRA Project Area No. 1 and 2A Debt Service Funds, respectively. The 2004-2005 advance of $939,215 and the 2005-2006 advance of $923,612 will be repaid by the Successor Agency from available future property tax revenues with no interest charged.

In fiscal year 2009-2010, the State required the former Community Redevelopment Agency to shift tax increment of $11,605,102 to the Supplemental Education Revenue Augmentation Fund (SERAF). To assist in funding this shift, the former CRA Housing Development Fund advanced $2,533,394 and $9,091,708 (100% of the total requirement) to the former CRA Project Area No. 1 and 2A Debt Service Funds, respectively. The 2009-2010 advance of $11,605,102 will be repaid by the Successor Agency from available future property tax revenues with no interest charged.

In fiscal year 2010-11, the State required the former Community Redevelopment Agency to shift tax increment of $2,389,286 to the Supplemental Education Revenue Augmentation Fund. To assist in funding this shift, the former CRA Housing Development Fund advanced $521,581 and $1,867,705 (100% of the total requirement) to the former CRA Project Area No. 1 and 2A Debt Service Funds, respectively. The 2010-2011 advance of $2,389,286 will be repaid by the Successor Agency from available property tax revenues with no interest charged.

The advances due to Housing Authority described above are approved enforceable obligations in existence at the date of dissolution and will be repaid by the Successor Agency from future property tax. The repayment amount cannot exceed one-half of the increase between the amount distributed to the taxing entities and the 2012-13 base year (or residuals). During FY 2015-16, the Housing Authority received $1,316,838 from the Successor Agency during the Recognized Obligations Payment Schedule (ROPS) period of July-December 2015 or ROPS 15-16A. During FY 2016-17, the Housing Authority received $4,230,955 from the Successor Agency during the Recognized Obligations Payment Schedule (ROPS) period of July-December 2016 or ROPS 16-17A. The Housing Authority received $1,500,000 as the third payment during the ROPS period of July- December 2017 or ROPS 17-18A.

95 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

E. Due to Other Governmental Units

The Successor Agency has advances due to the City as of June 30, 2018 of $378,665 for approved obligations paid by the City on behalf of the Agency.

F. Successor Agency Long-Term Debt

1. Notes Payable

2010 Series A and Series B Refunding Notes – The former Community Redevelopment Agency (CRA) issued a promissory Note for the purchase of 120 acres of industrial property known as the Fairway Business Park. On May 16, 2007, the former Community Redevelopment Agency approved a Settlement Agreement and Mutual General Release, which provided for the former Community Redevelopment Agency to pay a settlement amount of $23,043,000 for the property and $4,975,309 for accrued, unpaid interest. On September 1, 2010, the former Community Redevelopment Agency of the City of Palmdale issued $11,001,339 of 2010 Series A Tax Allocation Refunding Revenue Notes (2010 Series A Notes) and $16,504,000 of 2010 Series B Tax Allocation Refunding Revenue Notes (2010 Series B Notes). The net proceeds of the 2010 Series A & B Tax Allocation Refunding Revenue Notes were used to refinance the former Community Redevelopment Agency’s outstanding Fairway Business Park note payable.

The principal and interest on the Notes were payable from pledged property tax from the former Redevelopment Project Area No. 1. Interest on the notes is payable semi-annually on March 1 and September 1, beginning March 1, 2011. Principal installments are payable September 1 and March 1 of each year through 2026. The 2010 Series A Notes bear a fixed interest rate of 5.97% per annum and the 2010 Series B Notes bear a fixed interest rate of 6.2% per annum.

Upon dissolution of the former Community Redevelopment Agency, the Note Payable was an approved enforceable obligation by the State Department of Finance, therefore beginning February 1, 2012, the pledge and payments will be made from future property tax revenues received by the Private Purpose Trust. The current year payments of principal and interest were $2,750,660. The outstanding balance of the notes as of June 30, 2018 is $17,485,479.

Dillard’s Infrastructure Note Payable – The former Community Redevelopment Agency entered into a Third Implementation Agreement to a Disposition and Development Agreement to reimburse the developer for improvements relating to the construction of a Dillard’s department store. The agreement provides for a maximum reimbursement of $1,851,038 to Dillard’s for costs of the public Infrastructure improvements necessary for the site. The former Community Redevelopment Agency has pledged a one percent of sales tax revenues generated from Dillard’s department store to repay the Note. The amount to be reimbursed quarterly is based upon 50 percent of the sales tax revenue actually received by the former Community Redevelopment Agency, generated by the sales occurring at the Dillard’s department store as reported by the latest quarterly report. Reimbursement payments are due 30 days after the Agency receives notice stating the amount of sales tax revenue generated by sales occurring during such calendar quarter.

96 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

Upon dissolution of the former Community Redevelopment Agency the Note Payable was an approved enforceable obligation by the State Department of Finance, therefore beginning February 1, 2012, the pledge and payments will be made from future property tax revenues received by the Private Purpose Trust. The reimbursement payment made from the current year was $74,227, and the balance remaining to be paid from pledged future revenues total $167,139 as of June 30, 2018.

2. Tax Allocation Bonds

2002 Tax Allocation Bonds Payable ($5,329,758) – On August 20, 2002, the former Community Redevelopment Agency issued $5,329,748 of 2002 Subordinate Lien Tax Allocation Bonds (2002 Bonds). The 2002 Bonds constitute capital appreciation bonds that are not subject to redemption prior to their respective stated maturities. Interest on the 2002 Bonds compound at rates ranging from 4.88% to 5.68% per annum on June 1 and December 1, and will be payable solely at maturity or upon earlier redemption of the respective Bonds. The Bonds will mature and be payable December 1 of each year from 2016 through 2032.

The former Community Redevelopment Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund.

The proceeds of the 2002 Bonds were used to finance redevelopment activities in or of benefit to Project Area No. 2A. The former Community Redevelopment Agency has pledged incremental property tax generated in Project Area No. 2A to pay principal and interest with respect to the 2002 Bonds as they become due. The current year payment of principal was $965,000. No interest was paid for the current year. Property taxes received totaled $17,780,905 for the year. At year-end, pledged future revenues totaled $15,320,000 of which $10,311,738 was the amount of the remaining principal and $5,008,262 interest on the Bonds.

2016 Tax Allocation Bonds Payable ($31,490,000) - On April 26, 2016, the Successor Agency issued $31,490,000 of 2016 Series A Tax Allocation Refunding Bonds (2016 Series A Bonds). Interest on the 2016 Series A Bonds is payable semi-annually on March 1 and September 1 at rates ranging from 2.00% to 5.00% per annum. Principal installments are payable September 1 of each year to 2034.

The 2016 Series A Bonds maturing on or after September 1, 2027, may be redeemed on or after September 1, 2026, at par together with accrued interest, without premium.

The Successor Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund.

The Successor Agency has pledged incremental property tax generated in the Successor Agency’s project areas to pay principal and interest on the 2016 Series A Bonds. The current year payments of principal and interest were $2,978,175. Property taxes received totaled $27,614,561

97 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

for the year. At year-end, pledged future revenues totaled $40,380,825 of which $28,720,000 was the amount of the remaining principal and $11,660,825 interest on the Bonds.

2016 Tax Allocation Bonds Payable ($41,645,000) - On June 23, 2016, the Successor Agency issued $41,645,000 of 2016 Series B Tax Allocation Refunding Bonds (2016 Series B Bonds). Interest on the 2016 Series B Bonds is payable semi-annually on March 1 and September 1 at rates ranging from 3.00% to 5.00% per annum. Principal installments are payable September 1 of each year to 2034.

The 2016 Series B Bonds maturing on or after September 1, 2027, may be redeemed on or after September 1, 2026, at par together with accrued interest, without premium.

The Successor Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund.

The Successor Agency has pledged incremental property tax generated in the Successor Agency’s project areas to pay principal and interest on the 2016 Series B Bonds. The current year payments of principal and interest were $3,546,675. Property taxes received totaled $27,614,561 for the year. At year-end, pledged future revenues totaled $57,530,625 of which $40,050,000 was the amount of the remaining principal and $17,480,625 interest on the Bonds.

3. Change in Long Term Liabilities – The following debt activity for the year ended June 30, 2018 are not debts or obligations of the City. They were transferred to the Successor Agency of the former Community Redevelopment Agency which are now accounted for in the Private Purpose Trust Fund: Balance at Balance at Due Within July 1, 2017 Additions Retirements June 30, 2018 One Year Notes Payable - Developers: Fairway Business Park $ 19,099,581 $ - $ 1,614,102 $ 17,485,479 $ 1,715,292 Dillard's Infrastructure 241,366 - 74,227 167,139 - Total Notes Payable - Developers 19,340,947 - 1,688,329 17,652,618 1,715,292

Bonds Payable: 2002 Tax Allocations Bonds 10,715,972 560,765 965,000 10,311,737 949,836 2016 Tax Allocations Bonds Ser A 30,255,000 - 1,535,000 28,720,000 1,585,000 2016 Tax Allocations Bonds Ser B 41,645,000 - 1,595,000 40,050,000 1,665,000 Plus: Deferred Issuance Premium 12,426,033 - 1,652,990 10,773,043 1,556,549 Plus: Deferred Loss on Refunding (2,495,960) - 145,396 (2,350,565) (145,396) Total Bonds Payable 92,546,045 560,765 5,893,386 87,504,215 5,610,989

Total $ 111,886,992 $ 560,765 $ 7,581,716 $ 105,156,832 $ 7,326,281

98 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

(20) Commitments and Contingencies

A. Contracts and Purchase Orders

The City has contracted with the County of Los Angeles for various services, principally law enforcement until June 30, 2019. The agreement is maintained under “Contract City Law Enforcement Service Level Authorization” through which the County charges the set amount of service fees based on the number of deputies, support personnel, and their projected hours of services. The service rates are established by the County Auditor-Controller and adjusted annually effective July 1 of each year. To date, the annual increase in cost for the services provided has been approximately 4%. Accordingly, the projected commitments are constructed with such average increase. Additionally, the City is required to pay for the City’s portion of liability cost to ensure that funds are available in the event of litigations. The liability cost is currently 9.5% of the service units purchased and is scheduled to reach 10% for fiscal year 2017-18, and is expected to increase annually by an average of 1-3%. These contracts are cancelable at any time, with or without cause, upon 180- days written notice by the City or as of the first day of July of any year upon notice in writing not less than 60-days prior.

The following is the contract cost by year: FY 2018-19 $ 25,715,656 Total $ 25,715,656

The City also has other various outstanding contracts and purchase orders for services, supplies, materials, and capital projects that have not been completed at year-end. These commitments total approximately $10,909,776 at June 30, 2018, with the following breakdown between major funds and non-major funds.

Major Funds: General Fund $ 1,102,049 HA Housing Asset Fund 658,497 Street Lighting Assessment Fund 2,192,808 Total Major Funds 3,953,354

Non-Major Special Revenue Funds: 6,956,422 Total Commitments for Governmental Funds $ 10,909,776

B. Grants

The City has received State and Federal funds for specific purposes that are subject to review by the grantor agencies. Although such audits could generate expenditure disallowances under the terms of the grant, it is believed that any disallowed amounts will not be material.

C. Claims and Judgments

There are certain legal actions pending against the City that have arisen in the normal course of operations and are covered under the risk management liability. These actions include filed lawsuits

99 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

and asserted claims for personal injury, property damage, and wrongful death – auto accident. In the opinion of management, after consultation with counsel, the ultimate resolution of such actions may result in claims of less than $1,000,000.

D. Obligations of the Successor Agency Private Purpose Trust Fund

As more fully described at Note 20, the former Community Redevelopment Agency of the City of Palmdale was dissolved on January 31, 2012. Obligations to be paid out to the Successor Agency Private Purpose Trust Fund are included in the Required Obligation Payment Schedules (ROPS) which are subject to approval by the State Department of Finance. All obligations of the Successor Agency have been approved by the State Department of Finance, however, are still subject to audit by the County Auditor-Controller and the State Controller. Additionally, obligations on a future ROPS may be denied even if it was not questioned from a preceding ROPS. The City is not legally obligated for any of the Successor Agency Private Purpose Trust Fund debt.

(21) New Accounting Pronouncements

GASB Statement No. 83 – In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital asset should recognize a liability based on the guidance in this Statement. This Statement also requires disclosure of information about the nature of a government’s ARO, the methods and assumptions used for the estimates of the liabilities, and the estimated remaining useful life of the associated tangible capital assets. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018, or the 2018-19 fiscal year. This City has not determined the effect of implementing this statement.

GASB Statement No. 84 – In January 2017, GASB issued Statement No. 84, Fiduciary Activities. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018, or the 2019-20 fiscal year. The City has not determined the effect of implementing this statement.

GASB Statement No. 87 – In June 2017, GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about

100 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

governments’ leasing activities. The Statement is effective for the reporting periods beginning after December 15, 2019, or 2020-2021 fiscal year. The City has not determined the effect of implementing this statement.

GASB Statement No. 88 - In April 2018, GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. The requirements of this Statement are effective for periods beginning after June 15, 2018. The City has not determined the effect of implementing this statement.

GASB Statement No. 89 - In June 2018, GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. The objective of this Statement is to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and to simplify accounting for interest cost incurred before the end of a construction period. The requirements of this Statement are effective for periods beginning after December 15, 2019. The City has not determined the effect of implementing this statement.

GASB Statement No. 90 – In August 2018, GASB issued Statement No. 90, Majority Equity Interests-(an amendment of GASB Statements No. 14 and No. 61). The primary objectives of this Statement are to improve consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government’s holding of the equity interest meets the definition of an investment. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. The City has not determined the effect of implementing this statement.

(22) Subsequent Event

Subsequent to June 30, 2018, the Successor Agency of the Former Redevelopment Agency of the City of Palmdale successfully sold two additional properties and has twelve pending escrows out of the eleven remaining properties owned in accordance with the Long Range Property Management Plan approved on December 16, 2015.

(23) Restatement of Prior Year Net Position

As discussed in Note 1 to the financial statements, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.

101 City of Palmdale Notes to the Financial Statements For the Year Ended June 30, 2018

As discussed in Note 1 to the financial statements, the City has included the Palmdale Community Foundation (the Foundation) as a component unit of the City. The Foundation’s Board has the same governing body as the City, and City management is responsible for the operations of the Foundation.

The impact of the implementation on the beginning net position is as follows:

Governmental Activities

Net Position-Beginning of Year, as previously reported $ 844,961,807 Net OPEB Asset (Restated) 661,878 Net OPEB Asset (Prior Year) (168,277) Palmdale Community Foundation Equity 2,283 Net Position-Beginning of Year, as restated $ 845,457,691

Governmental Activities Previously Reported Restatement Restated

Net OPEB Asset (Prior Year) $ 168,277 $ (168,277) $ - Net OPEB Asset (Restated) - 661,878 661,878 Palmdale Community Foundation Net Position - 2,283 2,283 Net Position-Beginning of Year $ 844,961,807 $ 495,884 $ 845,457,691

In accordance with GASB 75, the restatement of all deferred inflows and outflows was not practicable and therefore not included in the restatement of beginning balance.

102

Required

Supplementary Information

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

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Required Supplementary Information ______

103 City of Palmdale Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios Public Employees Retirement Sytem (PERS) - Miscellaneous Plan Last Ten Years*

2015 2016 2017 2018 Total pension liability Service cost $ 2,590,160 $ 2,387,436 $ 2,233,050 $ 2,601,354 Interest on the total pension liability 10,116,430 10,398,124 10,825,834 11,018,183 Changes of assumptions - (2,606,465) - 9,269,931 Difference between expected and actual experience - (3,032,525) (948,090) (3,510,853) Benefit payments, including refunds of employee contributions (5,808,324) (6,049,238) (6,289,370) (6,542,229) Net change in total pension liability 6,898,266 1,097,332 5,821,424 12,836,386 Total pension liability -- beginning 136,494,809 143,393,075 144,490,407 150,311,831 Total pension liability -- ending (a) $ 143,393,075 $ 144,490,407 $ 150,311,831 $ 163,148,217

Plan fiduciary net position Contributions - employer $ 3,673,903 $ 3,871,255 $ 4,262,274 $ 5,157,320 Contributions - employee 1,106,027 1,030,304 1,016,500 1,165,598 Net investment income 16,152,589 2,406,554 545,870 12,177,480 Benefit payments including refunds of employee contributions (5,808,324) (6,049,238) (6,289,370) (6,542,229) Administrative Expense - (127,281) (66,805) (161,055) Net change in fiduciary net position 15,124,195 1,131,594 ( 531,531) 11,797,114 Plan fiduciary net position -- beginning 93,359,880 108,484,075 109,615,669 109,084,138 Plan fiduciary net position -- ending (b) 108,484,075 109,615,669 109,084,138 120,881,252

Net pension liability -- ending (a) - (b) $ 34,909,000 $ 34,874,738 $ 41,227,693 $ 42,266,965

Plan fiduciary net position as a percentage of the total pension liability 75.66% 75.86% 72.57% 74.09%

Covered payroll $ 13,588,668 $ 13,287,152 $ 12,550,868 $ 13,529,154

Net pension liability as a percentage of covered payroll 256.90% 262.47% 328.48% 312.41%

Measurement Date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017

*Fiscal year 2018 is the fourth year if implementation, therefore, only four years are shown.

104 City of Palmdale Required Supplementary Information Schedule of Contributions Public Employees Retirement System (PERS) - Miscellneous Plan Last Ten Years*

2015 2016 2017 2018

Actuarially determined contributions $ 3,871,255 $ 4,262,274 $ 5,157,320 $ 3,509,493 Contributions in relation to the actuarially determined contribution (3,871,255) (4,262,274) (5,157,320) (3,509,493) Contribution deficiency (excess) $ - $ - $ - $ -

Covered payroll $ 13,287,152 $ 12,550,868 $ 13,529,154 $ 14,797,277

Contributions as a percentage of covered payroll 29.14% 33.96% 38.12% 23.72%

Notes to Schedule Valuation date: 6/30/2013 6/30/2014 6/30/2015 6/30/2016

Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age Entry age Entry age Entry age

Amortization method Level Level Level Level percentage percentage of percentage of percentage of of payroll, closed payroll, closed payroll, closed payroll, closed

Remaining amortization period 15 years 20 years 25 years 30 years

Asset valuation method 5-year 15-year smoothed smoothed 5-year 5-year market market smoothed smoothed

Inflation 2.75% 2.75% 2.75% 2.75%

Salary Increase Varies on entry Varies on entry 3.30% to age, and age, and 4.5%, average, 14.20%, service, service, including including including including inflation of 3% inflation of 3% inflation of 3% inflation of 3%

Investment Rate of Return 7.5%, net of 7.5%, net of 7.5% net of 7.5% net of pension plan pension plan pension plan pension plan investment investment investment investment expense, expense, expense, expense, including including including including inflation inflation inflation inflation

Retirement age: The probabilities of Retirement and mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2014. Mortality: The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2014. Pre-retirement and Post-retirement mortality rates inlcude 5 years of projected mortality improvement using Scale BB published by the Society of Actuaries.

*Fiscal year 2015 was the first year of implementation, therefore, only four year is shown.

105 City of Palmdale Required Supplementary Information Schedule of Changes in the City's Net OPEB Liability and Related Ratios Other Postemployment Benefits (OPEB) Last Ten Years*

2017 2018 Total OPEB liability Service cost $ 9,380 $ 9,801 Interest 42,190 41,817 Differences between actual and expected experience 162,410 117,475 Benefit payments, including refunds of employee contributions (244,316) (195,980) Net change in total OPEB liability (30,336) (26,887) Total OPEB liability -- beginning 761,858 731,522 Total OPEB liability -- ending (a) $ 731,522 $ 704,635

Plan fiduciary net position Contributions - employer - - Contributions - employee - - Net investment income 165,897 122,424 Differences between projected and actual - - earnings on plan investments - - Administrative expenses (45,852) (42,234) Benefit payments, including refunds of employee contributions (244,316) (195,980) Net change in fiduciary net position (124,271) (115,790) Plan fiduciary net position -- beginning 1,517,671 1,393,400 Plan fiduciary net position -- ending (b) $ 1,393,400 $ 1,277,610

City's Net OPEB Asset -- ending (a) - (b) $ (661,878) $ (572,975)

Plan fiduciary net position as a percentage of the total OPEB Asset 190.48% 181.32%

Covered-employee payroll1 $ 840,010 $ 874,002

City's Net OPEB Asset as a percentage of covered-employee payroll -78.79% -65.56%

Measurement Date June 30, 2017 June 30, 2018

Notes to Schedule * Fiscal year 2017 was the first year of implementation, therefore, only two years are shown. 1 Contributions to the OPEB plan are not based on measure of pay, as such, covered employee payroll is used as the measure of payroll.

106 City of Palmdale Required Supplementary Information Schedule of Investment Returns Other Postemployment Benefits (OPEB) Last Ten Years*

2017 2018

Annual money-weighted rate of return - net of investment expense 11.23% 10.31%

Notes to Schedule * Fiscal year 2017 was the first year of implementation, therefore, only two years are shown.

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108 ______

Combining Statements Non-Major Governmental Funds ______

Special Revenue Funds – Are used to account for specific revenues that are legally restricted to expenditures for a particular purpose. The following special revenue funds have been classified as non- major funds:

Air Quality Improvement Fund – The revenue and related expenditures in this fund are for the City’s equipment and capital projects which improve air quality.

Community Development Block Grant (CDBG) Fund – This fund accounts for Federal entitlements under the Housing and Community Development Act of 1974, as amended.

Drainage Funds – This fund accounts for revenues collected under the City’s Drainage Fee, which are used for the development of drainage improvements.

Drainage Benefit Assessment District – This fund accounts for revenues collected under the City’s Drainage fee, which are used for the development of drainage improvements.

Federal Funds – This fund accounts for revenues and expenditures received from Federal sources.

Federal Home Program – This fund accounts for all federal funds received under the Home Investment Partnership Act.

Federal Jobs Program Fund – This fund accounts for revenues and expenditures associated with the Job Training Partnership Act and Welfare to Work Programs.

Fire Facilities Impact Fund – This fund accounts for revenues collected under the City’s Fire Facilities Impact Fee, which are used for constructing and outfitting facilities needed to serve future development.

Gas Tax Fund – This fund accounts for state gasoline allocations provided to the City for street-related purposes.

Housing Authority Fund – This fund accounts for compliance monitoring expenditures and Bond Issuer’s Fees collected for Housing Authority.

Landscape Maintenance Fund – This fund is used to account for revenues and expenditures attributable to Landscape Maintenance District 97-1.

Local Transportation Article 3 Fund – This fund is used to account for State funds provided to the City for construction of local bikeways and bikeway related projects.

Local Transportation Article 8 Fund – This fund accounts for State funds provided to the City for street-related purposes only.

Measure R Fund – This fund accounts for State Funds provided to the City for street-related purposes only.

Measure M Fund – This fund accounts for State Funds provided to the City for transportation related purposes only.

Miscellaneous Grants/Developer Contributions – This fund accounts for revenues and expenditures received from Developers and Local Agencies for improvements.

Parks Assessments Fund – This fund accounts for revenues collected under the City-wide Park Assessment District, which are used for the acquisition, improvement, expansion and maintenance of public parks.

Park Development Fund – This fund accounts for revenues collected under the City’s Unit Dwelling Fee, which are used for the acquisition, improvement and expansion of public parks, playgrounds & recreational facilities.

109

______

Combining Statements Non-Major Governmental Funds, Continued ______

Proposition A Fund – This fund accounts for special sales tax revenues, which are used for local transit.

Proposition C Fund – This fund accounts for special sales tax revenues and expenditures related to street and road improvements and transit.

Public Facilities Fund – This fund is used to account for revenues received from developer fees. These funds can only be used to assist with the development and rehabilitation of City buildings.

Public Safety Fund – This fund is used to account for the revenues received as a result of vehicle code violations and drug forfeiture operations. These funds can only be used for law enforcement expenditures.

S.A.V.E.S. Fund (South Antelope Valley Emergency Services) – This fund is used to account for revenues and expenditures related to providing food and shelter for qualified recipients.

Sewer Maintenance Assessment District – This fund is used to account for revenues and expenditures associated with the City sewer assessment district service the City and its sewer system.

Sewer Upgrade Fund – This fund accounts for revenues collected under the City’s Sewer Upgrade Fee, which are used for sewer improvements.

State Grants Fund – This fund accounts for revenues and expenditures received from State sources.

Traffic Impact Fund – This fund accounts for revenues collected under the City’s Traffic Impact Fee, which are used for traffic related projects, such as traffic signals and street improvements.

Housing Facilities Fund – This fund accounts for the revenues and expenditures restricted to the operations of four (4) City owned apartment buildings.

Palmdale Community Foundation – This fund accounts for the 501 (C) (3) non-profit public benefit corporation activities related to City programs.

Water Park – This fund accounts for the operation of the City owned Dry Town Water Park.

Debt Service Funds – are used to account for the accumulation of resources for and the payment made for principal and interest on bonded debt and other long-term obligations. The following fund has been classified as a non-major fund:

Palmdale Civic Authority Fund – This fund is used to account for construction projects funded through issuance of Certificates of Participation. Current projects include new park facilities and street improvements.

Palmdale Financing Authority Fund – This fund accounts for resources accumulated and payments made for principal and interest on Lease Revenue Bonds secured by lease payments by the City of Palmdale as rental for certain property pursuant to a lease agreement.

Capital Projects Funds – are used to account for financial resources used for the acquisition and construction of major capital facilities. The following capital projects funds have been classified as non- major funds:

Community Facilities District (CFD) – This fund accounts for the revenues and expenditures of community facilities districts and assessment districts, which are funded entirely from district bond proceeds.

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111 City of Palmdale Combining Balance Sheet Non-Major Governmental Funds June 30, 2018

Special Revenue Funds Community Drainage Air Quality Development Drainage Benefit Federal Federal Federal Fire Facilities Assets Improvement Block Grant Funds Assmnt Dist Funds Home Program Jobs Programs Impact

Assets: Cash $ ------Investments - - 3,691,087 737,601 67,280 - - 5,242,304 Receivables: Accounts and Interest Receivable - 417,565 12,841 2,566 739,541 1,902,198 19,895 18,238 Property Taxes Receivable - - - 31,077 - - - - Due from Other Funds ------Due from Other Governmental Units ------Deposits and Prepaids - 1,114 ------Notes and Liens - 1,693,342 - - - 7,090,220 - - Restricted Assets: Investments ------Interest Receivable ------Land Held for Resale - 766,710 - - - 330,860 - -

Total Assets - 2,878,731 3,703,928 771,244 806,821 9,323,278 19,895 5,260,542

Liabilities, Deferred Inflows of Resources and Fund Balances

Liabilities Accounts Payable - 340,106 10,887 2,058 6,339 53,991 4,695 - Due To Other Funds - 75,749 - - 800,482 12,652 15,200 - Due to Fiduciary Funds ------Deposits ------Unearned Revenue ------Notes Payable ------Total Liabilities - 415,855 10,887 2,058 806,821 66,643 19,895 -

Deferred Inflows of Resources Unavailable Revenue - 314 - - 601,896 1,836,919 - -

Total Deferred Inflows of Resources - 314 - - 601,896 1,836,919 - -

Fund Balances: Restricted - 2,462,562 3,693,041 769,186 - 7,419,716 - 5,260,542 Unassigned - - - - (601,896) - - -

Total Fund Balances (Deficit) - 2,462,562 3,693,041 769,186 (601,896) 7,419,716 - 5,260,542

Total Liabilities and Fund Balances $ - 2,878,731 3,703,928 771,244 806,821 9,323,278 19,895 5,260,542

112 City of Palmdale Combining Balance Sheet, Continuted Non-Major Governmental Funds June 30, 2018

Special Revenue Funds (continued) Local Local Misc Grants/ Housing Landscape Transportation Transportation Measure Measure Developer Parks Park Gas Tax Authority Maintenance Article 3 Article 8 R M Contributions Assessments Development Proposition A

------16,392,485 152,504 10,880,382 8,580 1,962,003 7,072,640 1,680,265 2,183,644 2,206,434 2,540,285 5,342,801

149,301 10,531 37,853 30 6,826 3,426,686 5,846 88,165 7,676 8,838 18,588 - - 193,097 - - - - - 68,729 - - 1,235,094 ------611,771 ------

------

17,776,880 163,035 11,111,332 8,610 1,968,829 10,499,326 1,686,111 2,271,809 2,282,839 3,160,894 5,361,389

29,623 8,953 384,091 - - 503,938 - 19,215 - 9,991 26,046 ------1,000 ------53,413 ------138,368 - - - - - 29,623 9,953 384,091 - - 642,306 - 19,215 - 63,404 26,046

- - - - - 2,894,761 - 12,241 - - -

- - - - - 2,894,761 - 12,241 - - -

17,747,257 153,082 10,727,241 8,610 1,968,829 6, 962,259 1, 686,111 2,240,353 2,282,839 3,097,490 5,335,343 ------

17,747,257 153,082 10,727,241 8,610 1,968,829 6,962,259 1,686,111 2,240,353 2,282,839 3,097,490 5,335,343

17,776,880 163,035 11,111,332 8,610 1,968,829 10,499,326 1,686,111 2,271,809 2,282,839 3,160,894 5,361,389

113 City of Palmdale Combining Balance Sheet, Continuted Non-Major Governmental Funds June 30, 2018

Special Revenue Funds (continued) Public Sewer Maint Facilities Public Assessment Sewer State Traffic Assets Proposition C Fund Safety SAVES District Upgrade Grants Impact

Assets: Cash $ - - - - 250 - - - Investments 8,195,365 131,847 - - 17,849,014 868,603 465,289 3,119,773 Receivables: Accounts and Interest Receivable 1,293,794 459 49,165 14,823 65,884 3,022 1,141,759 10,854 Property Taxes Receivable - - 30 - 129,727 - - - Due from Other Funds ------Due from Other Governmental Units ------Deposits and Prepaids ------Notes and Liens ------Restricted Assets: Investments ------Interest Receivable ------Land Held for Resale ------

Total Assets 9,489,159 132,306 49,195 14,823 18,044,875 871,625 1,607,048 3,130,627

Liabilities, Deferred Inflows of Resources and Fund Balances

Liabilities Accounts Payable $ 269,991 12,904 - 3,059 58,414 - 157,542 - Due To Other Funds - - 1,166 11,764 - - 1,140,361 - Due to Other Governmental Units ------Deposits ------279 - Deposits ------Unearned Revenue ------Total Liabilities 269,991 12,904 1,166 14,823 58,414 - 1,298,182 -

Deferred Inflows of Resources Unavailable Revenue 1,247,523 - - 14,823 - - 1,038,712 -

Total Deferred Inflows of Resources 1,247,523 - - 14,823 - - 1,038,712 -

Fund Balances: Restricted 7,971,645 119,402 48, 029 - 17,986,461 871,625 - 3,130,627 Unassigned - - - (14,823) - - (729,846) -

Total Fund Balances (Deficit) 7,971,645 119,402 48,029 (14,823) 17,986,461 871,625 (729,846) 3,130,627

Total Liabilities and Fund Balances $ 9,489,159 132,306 49,195 14,823 18,044,875 871,625 1,607,048 3,130,627

114 City of Palmdale Combining Balance Sheet, Continuted Non-Major Governmental Funds June 30, 2018

Capital Projects Special Revenue Funds (continued) Debt Funds Fund Total Palmdale Total Palmdale CFD/ Non-Major Housing Community Special Palmdale Civic Financing Assessment Governmental Facilities Foundation Water Park Revenue Funds Authority Authority Districts Funds

88,045 257,275 5,578 351,148 - - - $ 351,148 317,757 - 92,255 91,200,198 1,017,578 - 15,429 92,233,205

8,596 - 1,695 9,463,235 3,540 - 54 9,466,829 - - - 422,660 - - - 422,660 - - - 1,846,865 - - - 1,846,865 ------583,859 583,859 - - - 1,114 - - - 1,114 - - - 8,783,562 - - - 8,783,562 - 1,084,746 - - 1,084,746 1,509,975 32 3,491,270 6,086,023 220 - - 220 7,131 - 4,897 12,248 - - - 1,097,570 - - - 1,097,570

1,499,364 257,275 99,528 114,251,318 2,538,224 32 4,095,509 $ 120,885,083

232,155 2,821 92,255 2,229,074 - - 144 2,229,218 - 6,707 - 2,064,081 - - 2,216 2,066,297 ------1,565 1,565 163,201 - - 164,480 - - - 164,480 - - - 53,413 - - - 53,413 - - - 138,368 - - - 138,368 395,356 9,528 92,255 4,649,416 - - 3,925 4,653,341

- - - 7,647,189 - - - 7,647,189

- - - 7,647,189 - - - 7,647,189

1,104,008 247,747 7,273 103,301,278 2,538,224 32 4,091,584 109,931,118 - - - (1,346,565) - - - (1,346,565)

1,104,008 247,747 7,273 101,954,713 2,538,224 32 4,091,584 108,584,553

1,499,364 257,275 99,528 114,251,318 2,538,224 32 4,095,509 $ 120,885,083

115 City of Palmdale Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds June 30, 2018

Special Revenue Funds Community Drainage Air Quality Development Drainage Benefit Federal Federal Home Federal Fire Improvement Block Grant Funds Assmt. Dist. Funds Program Jobs Programs Facilities Revenues: Other Taxes $ ------Subventions and Grants 25,523 1,372,398 - - 2,263,112 339,136 700,732 - Park Development Fees ------Licenses and Permits ------Fines and Forfeitures ------Special Assessments - - - 116,844 - - - - Use of Property ------Charges for Current Services - - 50,431 - - - 40,647 - Drainage Fees - - 262,141 - - - - - Traffic Impact Fees ------Facilities Impact Fees ------434,501 Interest - 282 49,092 10,386 - 1,321 - 68,195 Net Decrease in the Fair Value of Investments - - (19,945) (3,962) - - - (28,404) Developer Contributions ------State Contributions ------County Contributions ------Other - 37,276 - 87 - - - -

Total Revenues 25,523 1,409,956 341,719 123,355 2,263,112 340,457 741,379 474,292

Expenditures: Current: General Government - - 52,000 - - - - 21,725 Public Safety - - - - 66,370 - - - Public Services - - 42,575 55,080 - - - - Community Development - 347,806 - - - 159,826 - - Cultural and Recreational ------Health and Welfare - 217,670 - - - - 550,293 - Capital Outlay 25,523 237,173 307,895 117,125 1,711,191 - - - Debt Service: Principal - 268,000 ------Interest - 147,866 ------Total Expenditures 25,523 1,218,515 402,470 172,205 1,777,561 159,826 550,293 21,725

Excess (Deficiency) of Revenues Over (Under) Expenditures - 191,441 (60,751) (48,850) 485,551 180,631 191,086 452,567

Other Financing Sources(Uses): Transfers In 44,972 - - - - - 19,866 - Transfers Out - (71,144) ------

Total Other Financing Sources (Uses) 44,972 (71,144) - - - - 19,866 -

Net Changes in Fund Balances 44,972 120,297 (60,751) (48,850) 485,551 180,631 210,952 452,567

Fund Balances (Deficits) - Beginning of Year (44,972) 2,342,265 3,753,792 818,036 (1,087,447) 7,239,085 (210,952) 4,807,975 Fund Balances (Deficits) - End of Year $ - 2,462,562 3,693,041 769,186 (601,896) 7,419,716 - 5,260,542

116 City of Palmdale Combining Statements of Revenues, Expenditures and Changes in Fund Balances, Continued Non-Major Governmental Funds June 30, 2018

Special Revenue Funds (continued) Local Local Misc Grants/ Housing Landscape Transportation Transportation Measure Measure Developer Parks Park Gas Tax Authority Maintenance Article 3 Article 8 R M Contributions Assessments Development Proposition A

3,310,498 ------6,150,445 5,116,107 1,695,748 459,567 - 100,000 2,985,866 ------489,840 ------2,758 ------5,650,721 - - - - - 2,553,982 ------47,530 ------200,959 1,889 138,754 165 15,733 91,002 - 2,672 20,767 35,633 68,493

(89,932) (828) (59,293) (42) (11,130) (38,225) (9,637) (1,089) (12,527) (13,590) (28,955) - - 5,000 ------7,443 ------118,710 ------25,601 - 40,662 - - - - 75,222 15,053 - -

3,573,279 48,591 5,778,602 123 6,155,048 5,168,884 1,686,111 536,372 2,577,275 611,883 3,025,404

199,184 - 65,000 - - - - - 87,655 65,000 ------42,503 - - - 61,790 - 5,043,634 - 5,460,486 - - - - - 2,062,740 - 39,401 ------108,150 100,000 ------435,156 - 205,482 12,670 - 3,124,809 - 121,123 - 221,856 358,137

------

696,130 39,401 5,314,116 12,670 5,460,486 3,124,809 - 163,626 195,805 386,856 2,420,877

2,877,149 9,190 464,486 (12,547) 694,562 2,044,075 1,686,111 372,746 2,381,470 225,027 604,527

286,002 ------(270,100) ------(2,088,083) - -

15,902 ------(2,088,083) - -

2,893,051 9,190 464,486 (12,547) 694,562 2,044,075 1,686,111 372,746 293,387 225,027 604,527

14,854,206 143,892 10,262,755 21,157 1,274,267 4,918,184 - 1,867,607 1,989,452 2,872,463 4,730,816 - 17,747,257 153,082 10,727,241 8,610 1,968,829 6,962,259 1,686,111 2,240,353 2,282,839 3,097,490 5,335,343

117 City of Palmdale Combining Statement of Revenues, Expenditures and Changes in Fund Balances, Continued Non-Major Governmental Funds June 30, 2018

Special Revenue Funds (continued) Sewer Maint Public Public Assessment Sewer State Traffic Proposition C Facilities Safety SAVES District Upgrade Grants Impact Revenues: Other Taxes ------Subventions and Grants $ 5,264,786 - 339,864 24,023 - - 1,532,247 - Park Development Fees ------Licenses and Permits - - - - 94,009 - - - Fines and Forfeitures - - 288,367 - - - - - Special Assessments - - - - 5,422,729 - - - Use of Property ------Charges for Current Services - - - - 447,999 - - - Drainage Fees ------Traffic Impact Fees ------612,063 Facilities Impact Fees - 157,660 ------Interest 96,748 2,189 990 - 219,265 11,521 3,873 39,931 Net Decrease in the Fair Value of Investments (45,281) (631) 45 - (97,707) (4,693) (1,655) (16,785) Developer Contributions ------State Contributions ------County Contributions ------Other - - - - 38,525 - - -

Total Revenues 5,316,253 159,218 629,266 24,023 6,124,820 6,828 1,534,465 635,209

Expenditures: Current: General Government - - - - 65,000 - - 65,000 Public Safety - - 631,363 - - - - - Public Services 258,534 - - - 2,186,422 - 81,925 - Community Development ------Cultural and Recreational ------Health and Welfare - - - 23,057 - - - - Capital Outlay 1,207,549 353,489 - - 108,795 - 540,892 7,591 Debt Service: Principal ------Interest ------Total Expenditures 1,466,083 353,489 631,363 23,057 2,360,217 - 622,817 72,591

Excess (Deficiency) of Revenues Over (Under) Expenditures 3,850,170 (194,271) (2,097) 966 3,764,603 6,828 911,648 562,618

Other Financing Sources(Uses): Transfers In ------Transfers Out (547,594) ------(669,960)

Total Other Financing Sources (Uses) (547,594) ------(669,960)

Net Change in Fund Balances 3,302,576 (194,271) (2,097) 966 3,764,603 6,828 911,648 (107,342)

Fund Balances (Deficits) - Beginning of Year 4,669,069 313,673 50,126 (15,789) 14,221,858 864,797 (1,641,494) 3,237,969 Fund Balances (Deficits) - End of Year $ 7,971,645 119,402 48,029 (14,823) 17,986,461 871,625 (729,846) 3,130,627

118 City of Palmdale Combining Statement of Revenues, Expenditures and Changes in Fund Balances, Continued Non-Major Governmental Funds June 30, 2018

Capital Projects Special Revenue Funds (continued) Debt Funds Fund Total Palmdale Total Palmdale CFD/ Non-Major Housing Community Special Palmdale Civic Financing Assessment Governmental Facilities Foundation Water Park Revenue Funds Authority Authority District Funds

- - - 3,310,498 - - - $ 3,310,498 - - - 28,369,554 - - - 28,369,554 - - - 489,840 - - - 489,840 - - - 94,009 - - - 94,009 - - - 291,125 - - - 291,125 - - - 13,744,276 - - - 13,744,276 2,175,480 - 124,541 2,300,021 - - - 2,300,021 - - 1,096,860 1,683,467 - - - 1,683,467 - - - 262,141 - - - 262,141 - - - 612,063 - - - 612,063 - - - 592,161 - - - 592,161 7,290 - - 1,087,150 35,447 228 37,169 1,159,994

(1,648) - - (485,914) (5,498) - (83) (491,495) - - - 5,000 - - - 5,000 - - - 7,443 - - - 7,443 - - - 118,710 - - - 118,710 - 369,278 34,434 636,138 - - - 636,138

2,181,122 369,278 1,255,835 53,117,682 29,949 228 37,086 53,184,945

- - - 620,564 - - - 620,564 - - - 740,236 - - - 740,236 - - - 15,253,186 - - 2,022 15,255,208 1,582,152 - - 2,129,185 - - - 2,129,185 - - 1,265,224 1,473,374 - - - 1,473,374 - 379,217 - 1,170,237 - - - 1,170,237 698,299 - - 9,794,755 - - 723,247 10,518,002

85,000 - - 353,000 440,000 1,495,000 - 2,288,000 192,483 - - 340,349 1,053,306 985,722 - 2,379,377

2,557,934 379,217 1,265,224 31,874,886 1,493,306 2,480,722 725,269 36,574,183

(376,812) (9,939) (9,389) 21,242,796 ( 1,463,357) (2,480,494) (688,183) 16,610,762

- 255,403 16,662 622,905 1,486,836 2,475,147 - 4,584,888 - - - (3,646,881) - - - (3,646,881)

- 255,403 16,662 (3,023,976) 1,486,836 2,475,147 - 938,007

(376,812) 245,464 7,273 18,218,820 23,479 (5,347) (688,183) 17,548,769

1,480,820 2,283 - 83,735,893 2,514,745 5,379 4,779,767 91,035,784 1,104,008 247,747 7,273 101, 954,713 2,538,224 32 4,091,584 $ 108,584,553

119

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120

Budgetary Comparison Schedules

121 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Air Quality Improvement For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ - 25,530 25,523 (7)

Total Revenues - 25,530 25,523 (7)

Expenditures: Capital Outlay - 25,530 25,523 7

Total Expenditures - 25,530 25,523 7

Excess (Deficiency) of Revenues Over (Under) Expenditures - - - -

Other Financing Sources (Uses): Transfers In - 44,970 44,972 2 Transfers Out - - - -

Total Other Financing Sources (Uses) - 44,970 44,972 2

Net Change in Fund Balance - 44,970 44,972 2

Fund Balance - Beginning of Year (44,972) (44,972) (44,972) -

Fund Balance - End of Year $ (44,972) (2) - 2

122 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Community Development Block Grant For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 1,917,840 3,828,330 1,372,398 (2,455,932) Interest - - 282 282 Other 715,000 - 37,276 37,276 Total Revenues 2,632,840 3,828,330 1,409,956 (2,418,374)

Expenditures: Current: Community Development 460,320 980,900 347,806 633,094 Health and Welfare 927,740 220,000 217,670 2,330 Capital Outlay 950,230 2,332,880 237,173 2,095,707 Debt Service: Principal 268,000 268,000 268,000 - Interest 147,870 147,870 147,866 4

Total Expenditures 2,754,160 3,949,650 1,218,515 2,731,135

Excess (Deficiency) of Revenues Over (Under) Expenditures (121,320) (121,320) 191,441 312,761

Other Financing Sources (Uses): Transfers Out - - (71,144) (71,144)

Total Other Financing Sources (Uses) - - (71,144) (71,144)

Net Change in Fund Balance (121,320) (121,320) 120,297 241,617

Fund Balance - Beginning of Year 2,342,265 2,342,265 2,342,265 -

Fund Balance - End of Year $ 2,220,945 2,220,945 2,462,562 241,617

123 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Drainage For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Charges for Current Services $ - 50,500 50,431 (69) Drainage Fees 110,000 216,600 262,141 45,541 Interest 11,050 29,600 49,092 19,492 Net Decrease in the Fair Value of Investments - - (19,945) (19,945)

Total Revenues 121,050 296,700 341,719 45,019

Expenditures: Current: General Government - - 52,000 (52,000) Public Services - - 42,575 (42,575) Capital Outlay 1,660,000 1,703,320 307,895 1,395,425

Total Expenditures 1,660,000 1,703,320 402,470 1,300,850

Excess (Deficiency) of Revenues Over (Under) Expenditures (1,538,950) (1,406,620) (60,751) 1,345,869

Other Financing Sources (Uses): Transfers In 150,000 650,000 - (650,000) Transfers Out (109,270) (601,400) - 601,400 - Total Other Financing Sources (Uses) 40,730 48,600 - (48,600)

Net Change in Fund Balance (1,498,220) (1,358,020) (60,751) 1,297,269

Fund Balance - Beginning of Year 3,753,792 3,753,792 3,753,792 -

Fund Balance - End of Year $ 2,255,572 2,395,772 3,693,041 1,297,269

124 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Drainage Benefit Assessment District For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Special Assessments $ 112,720 112,750 116,844 4,094 Interest 1,500 1,500 10,386 8,886 Net Decrease in the Fair Value of Investments: - - (3,962) (3,962) Other 100 50 87 37 Total Revenues 114,320 114,300 123,355 9,055

Expenditures: Current: Public Services 115,180 113,170 55,080 58,090 Capital Outlay 214,000 214,000 117,125 96,875

Total Expenditures 329,180 327,170 172,205 58,090

Net Change in Fund Balance (214,860) (212,870) (48,850) 164,020

Fund Balance - Beginning of Year 818,036 818,036 818,036 -

Fund Balance - End of Year $ 603,176 605,166 769,186 164,020

125 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Funds For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 6,629,550 3,140,670 2,263,112 (877,558)

Total Revenues 6,629,550 3,140,670 2,263,112 (877,558)

Expenditures: Current: Public Safety - - 66,370 (66,370) Capital Outlay 6,563,180 3,074,300 1,711,191 1,363,109

Total Expenditures 6,563,180 3,074,300 1,777,561 1,296,739

Excess (Deficiency) of Revenues Over (Under) Expenditures 66,370 66,370 485,551 419,181

Other Financing Sources (Uses): Transfers Out (66,370) (66,370) - 66,370

Net Change in Fund Balance - - 485,551 485,551

Fund Balance - Beginning of Year (1,087,447) (1,087,447) (1,087,447) -

Fund Balance - End of Year $ (1,087,447) (1,087,447) (601,896) 485,551

126 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Home Program For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 365,000 1,309,560 339,136 (970,424) Interest 191,490 204,810 1,321 (203,489)

Total Revenues 556,490 1,514,370 340,457 (1,173,913)

Expenditures: Current: Community Development 365,000 1,309,560 159,826 1,149,734

Total Expenditures 365,000 1,309,560 159,826 1,149,734

Net Change in Fund Balance 191,490 204,810 180,631 (24,179)

Fund Balance - Beginning of Year 7,239,085 7,239,085 7,239,085 -

Fund Balance - End of Year $ 7,430,575 7,443,895 7,419,716 (24,179)

127 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Jobs Program For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 3,000,000 507,000 700,732 193,732 Charges for Services 42,100 46,400 40,647 (5,753)

Total Revenues 3,042,100 553,400 741,379 187,979

Expenditures: Current: Health and Welfare 3,045,800 553,400 550,293 3,107

Total Expenditures 3,045,800 553,400 550,293 3,107

Excess (Deficiency) of Revenues Over (Under) Expenditures (3,700) - 191,086 191,086

Other Financing Sources (Uses) Transfers In 3,700 - 19,866 19,866

Total Other Financing Sources (Uses) 3,700 - 19,866 19,866

Net Change in Fund Balance - - 210,952 210,952

Fund Balance - Beginning of Year (210,952) (210,952) (210,952) -

Fund Balance - End of Year $ (210,952) (210,952) - 210,952

128 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Fire Facilities Impact Special Revenue Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Fire Facilities Impact Fees $ 250,000 350,000 434,501 84,501 Interest 10,000 10,000 68,195 58,195 Net Decrease in the Fair Value of Investments - - (28,404) (28,404)

Total Revenues 260,000 360,000 474,292 114,292

Expenditures: Current: General Government 20,800 28,000 21,725 6,275 Capital Outlay 600,000 - - -

Total Expenditures 620,800 28,000 21,725 6,275

Net Change in Fund Balance (360,800) 332,000 452,567 120,567

Fund Balance - Beginning of Year 4,807,975 4,807,975 4,807,975 -

Fund Balance - End of Year $ 4,447,175 5,139,975 5,260,542 120,567

129 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Gas Tax For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Other Taxes $ 5,041,910 5,386,990 3,310,498 (2,076,492) Interest 100,000 100,000 200,959 100,959 Net Decrease in the Fair Value of Investments: - - (89,932) (89,932) State Contributions 6,000 6,450 7,443 993 County Contributions 125,000 125,000 118,710 (6,290) Other - 4,750 25,601 20,851

Total Revenues 5,272,910 5,623,190 3,573,279 (2,049,911)

Expenditures: Current: General Government - - 199,184 (199,184) Public Services - - 61,790 (61,790) Capital Outlay 13,767,890 8,227,170 435,156 7,792,014

Total Expenditures 13,767,890 8,227,170 696,130 7,531,040

Excess (Deficiency) of Revenues Over (Under) Expenditures (8,494,980) (2,603,980) 2,877,149 5,481,129

Other Financing Sources (Uses): Transfers In - - 286,002 - Transfers Out (1,194,760) (1,242,850) (270,100) 972,750

Total Other Financing Sources (Uses) (1,194,760) (1,242,850) 15,902 972,750

Net Change in Fund Balance (9,689,740) (3,846,830) 2,893,051 6,453,879

Fund Balance - Beginning of Year 14,854,206 14,854,206 14,854,206 -

Fund Balance - End of Year $ 5,164,466 11,007,376 17,747,257 6,739,881

130 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Housing Authority For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Charges for Current Services $ 47,520 67,520 47,530 (19,990) Interest 500 500 1,889 1,389 Net Decrease in the Fair Value of Investments - - (828) (828)

Total Revenues 48,020 68,020 48,591 (19,429)

Expenditures: Current: Community Development 66,950 63,820 39,401 24,419

Total Expenditures 66,950 63,820 39,401 24,419

Net Change in Fund Balance (18,930) 4,200 9,190 4,990

Fund Balance - Beginning of Year 143,892 143,892 143,892 -

Fund Balance - End of Year $ 124,962 148,092 153,082 4,990

131 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Landscape Maintenance For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Fines and Forfeitures $ - - 2,758 2,758 Special Assessments 5,443,410 5,450,000 5,650,721 200,721 Interest 25,000 100,000 138,754 38,754 Net Decrease in the Fair Value of Investments: - - (59,293) (59,293) Developer Contributions - 5,000 5,000 - Other 16,000 10,000 40,662 30,662

Total Revenues 5,484,410 5,565,000 5,778,602 210,844

Expenditures: Current: General Government - - 65,000 (65,000) Public Services 5,787,820 5,557,780 5,043,634 514,146 Capital Outlay 2,873,000 287,000 205,482 81,518

Total Expenditures 8,660,820 5,844,780 5,314,116 530,664

Excess (Deficiency) of Revenues Over (Under) Expenditures (3,176,410) (279,780) 464,486 744,266

Other Financing Sources (Uses): Transfers Out (65,000) (65,000) - 65,000

Net Change in Fund Balance (3,241,410) (344,780) 464,486 809,266

Fund Balance - Beginning of Year 10,262,755 10,262,755 10,262,755 -

Fund Balance - End of Year $ 7,021,345 9,917,975 10,727,241 809,266

132 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Local Transportation - Article 3 For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 103,960 50,000 - (50,000) Interest 100 - 165 165 Net Decrease in the Fair Value of Investments: - - (42) (42)

Total Revenues 104,060 50,000 123 (49,877)

Expenditures: Capital Outlay - 71,160 12,670 58,490

Total Expenditures - 71,160 12,670 58,490

Net Change in Fund Balance 104,060 (21,160) (12,547) 8,613

Fund Balance - Beginning of Year 21,157 21,157 21,157 -

Fund Balance - End of Year $ 125,217 $ (3) 8,610 8,613

133 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Local Transportation - Article 8 For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 6,134,810 6,134,810 6,150,445 15,635 Interest 500 - 15,733 15,733 Net Decrease in the Fair Value of Investments: - - (11,130) (11,130)

Total Revenues 6,135,310 6,134,810 6,155,048 20,238

Expenditures: Current: Public Services - - 5,460,486 (5,460,486) Capital Outlay 403,890 - - -

Total Expenditures 403,890 - 5,460,486 (5,460,486)

Excess (Deficiency) of Revenues Over (Under) Expenditures 5,731,420 6,134,810 694,562 (5,440,248)

Other Financing Sources (Uses): Transfers Out (6,034,090) (5,878,850) - 5,878,850

Net Change in Fund Balance (302,670) 255,960 694,562 438,602

Fund Balance - Beginning of Year 1,274,267 1,274,267 1,274,267 -

Fund Balance - End of Year $ 971,597 $ 1,530,227 1,968,829 438,602

134 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Measure R For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 59,155,160 15,037,320 5,116,107 (9,921,213) Interest 10,000 10,000 91,002 81,002 Net Decrease in the Fair Value of Investments: - - (38,225) (38,225)

Total Revenues 59,165,160 15,047,320 5,168,884 (9,878,436)

Expenditures: Capital Outlay 57,929,370 14,184,690 3,124,809 11,059,881

Total Expenditures 57,929,370 14,184,690 3,124,809 11,059,881

Net Change in Fund Balance 1,235,790 862,630 2,044,075 1,181,445

Fund Balance - Beginning of Year 4,918,184 4,918,184 4,918,184 -

Fund Balance - End of Year $ 6,153,974 5,780,814 6,962,259 1,181,445

135 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Measure M For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 1,887,100 1,886,100 1,695,748 (190,352) Interest - - - - Net Decrease in the Fair Value of Investments: - - (9,637) (9,637)

Total Revenues 1,887,100 1,886,100 1,686,111 (199,989)

Expenditures: Capital Outlay - - - -

Total Expenditures - - - -

Net Change in Fund Balance 1,887,100 1,886,100 1,686,111 (199,989)

Fund Balance - Beginning of Year - - - -

Fund Balance - End of Year $ 1,887,100 1,886,100 1,686,111 (199,989)

136 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Miscellaneous Grants/Developer Contributions For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ - - 459,567 459,567 Interest - - 2,672 2,672 Net Decrease in the Fair Value of Investments: - - (1,089) (1,089) Developer Contributions 35,740 114,460 - (114,460) Other Agency Contributions 4,420,490 700,000 - (700,000) Other - - 75,222 75,222

Total Revenues 4,456,230 814,460 536,372 (278,088)

Expenditures: Current: Public Safety - 153,000 42,503 110,497 Capital Outlay 4,456,230 814,460 121,123 693,337

Total Expenditures 4,456,230 967,460 163,626 693,337

Excess (Deficiency) of Revenues Over (Under) Expenditures - (153,000) 372,746 525,746

Other Financing Sources (Uses): Transfers Out - (50,000) - 50,000

Net Change in Fund Balance - (203,000) 372,746 525,746 . Fund Balance - Beginning of Year 1,867,607 1,867,607 1,867,607 -

Fund Balance - End of Year $ 1,867,607 1,664,607 2,240,353 575,746

137 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Parks Assessments For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Special Assessments $ 2,396,480 2,431,600 2,553,982 122,382 Interest 2,500 10,000 20,767 10,767 Net Decrease in the Fair Value of Investments: - - (12,527) (12,527) Other 8,000 14,200 15,053 853

Total Revenues 2,406,980 2,455,800 2,577,275 121,475

Expenditures: Current: General Government 89,590 88,090 87,655 435 Cultural and Recreational - - 108,150 (108,150)

Total Expenditures 89,590 88,090 195,805 (107,715)

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,317,390 2,367,710 2,381,470 13,760

Other Financing Sources (Uses): Transfers Out (2,358,460) (2,196,230) (2,088,083) 108,147

Net Change in Fund Balance (41,070) 171,480 293,387 121,907

Fund Balance - Beginning of Year 1,989,452 1,989,452 1,989,452 -

Fund Balance - End of Year $ 1,948,382 2,160,932 2,282,839 121,907

138 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Park Development For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 100,000 100,000 100,000 - Park Development Fees 30,000 600,000 489,840 (110,160) Interest 10,000 5,000 35,633 30,633 Net Decrease in the Fair Value of Investments: - - (13,590) (13,590) Other - - - -

Total Revenues 140,000 705,000 611,883 (93,117)

Expenditures: Current: General Government - - 65,000 (65,000) Cultural and Recreational - - 100,000 (100,000) Capital Outlay 900,000 340,630 221,856 118,774

Total Expenditures 900,000 340,630 386,856 (46,226)

Excess (Deficiency) of Revenues Over (Under) Expenditures (760,000) 364,370 225,027 (139,343)

Other Financing Sources (Uses): Transfers Out (315,000) (315,000) - 315,000

Net Change in Fund Balance (1,075,000) 49,370 225,027 175,657

Fund Balance - Beginning of Year 2,872,463 2,872,463 2,872,463 -

Fund Balance - End of Year $ 1,797,463 2,921,833 3,097,490 175,657

139 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Proposition A For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 2,969,700 2,969,700 2,985,866 16,166 Interest 30,000 30,000 68,493 38,493 Net Decrease in the Fair Value of Investments - - (28,955) (28,955)

Total Revenues 2,999,700 2,999,700 3,025,404 25,704

Expenditures: Current: Public Services - - 2,062,740 (2,062,740) Capital Outlay 1,272,240 806,000 358,137 447,863

Total Expenditures 1,272,240 806,000 2,420,877 (1,614,877)

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,727,460 2,193,700 604,527 (1,589,173)

Other Financing Sources (Uses): Transfers Out (2,441,300) (2,418,720) - 2,418,720

Net Change in Fund Balance (713,840) (225,020) 604,527 829,547

Fund Balance - Beginning of Year 4,730,816 4,730,816 4,730,816 -

Fund Balance - End of Year $ 4,016,976 4,505,796 5,335,343 829,547

140 City of Palmdale Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Proposition C For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 7,624,620 4,225,140 5,264,786 1,039,646 Interest 10,000 10,000 96,748 86,748 Net Decrease in the Fair Value of Investments: - - (45,281) (45,281)

Total Revenues 7,634,620 4,235,140 5,316,253 1,081,113

Expenditures: Current: Public Services - - 258,534 (258,534) Capital Outlay 5,282,920 1,961,860 1,207,549 754,311

Total Expenditures 5,282,920 1,961,860 1,466,083 495,777

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,351,700 2,273,280 3,850,170 1,576,890

Other Financing Sources (Uses): Transfers Out (915,600) (810,090) (547,594) 262,496

Total Other Financing Sources (Uses) (915,600) (810,090) (547,594) 262,496

Net Change in Fund Balance 1,436,100 1,463,190 3,302,576 1,839,386

Fund Balance - Beginning of Year 4,669,069 4,669,069 4,669,069 -

Fund Balance - End of Year $ 6,105,169 6,132,259 7,971,645 1,839,386

141 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public Facilities Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Facilities Impact Fees $ 25,000 150,000 157,660 7,660 Interest 250 500 2,189 1,689 Net Decrease in the Fair Value of Investments: - - (631) (631)

Total Revenues 25,250 150,500 159,218 8,718

Expenditures: Capital Outlay - 390,000 353,489 36,511 Total Expenditures - 390,000 353,489 36,511 Excess (Deficiency) of Revenues Over (Under) Expenditures 25,250 (239,500) (194,271) 45,229

Net Change in Fund Balance 25,250 (239,500) (194,271) 45,229

Fund Balance - Beginning of Year 313,673 313,673 313,673 -

Fund Balance - End of Year $ 338,923 74,173 119,402 45,229

142 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public Safety For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 247,780 323,000 339,864 16,864 Fines and Forfeitures 258,000 258,000 288,367 30,367 Interest 500 500 990 490 Net Increase in the Fair Value of Investments: - - 45 45

Total Revenues 506,280 581,500 629,266 47,766

Expenditures: Current: Public Safety - - 631,363 (631,363)

Total Expenditures - - 631,363 (631,363)

Excess (Deficiency) of Revenues Over (Under) Expenditures 506,280 581,500 (2,097) (583,597)

Other Financing Sources (Uses): Transfers Out (506,280) (581,000) - 581,000

Net Change in Fund Balance - 500 (2,097) (2,597)

Fund Balance - Beginning of Year 50,126 50,126 50,126 -

Fund Balance - End of Year $ 50,126 50,626 48,029 (2,597)

143 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual South Antelope Valley Emergency Services (SAVES) For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 35,000 24,020 24,023 3

Total Revenues 35,000 24,020 24,023 3

Expenditures: Current: Health and Welfare 35,000 24,020 23,057 963

Total Expenditures 35,000 24,020 23,057 963

Net Change in Fund Balance - - 966 966

Fund Balance (Deficit) - Beginning of Year (15,789) (15,789) (15,789) -

Fund Balance (Deficit) - End of Year $ (15,789) (15,789) (14,823) 966

144 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Sewer Maintenance Assessment District For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Licenses and Permits $ 171,000 87,450 94,009 6,559 Special Assessments 5,464,000 5,450,000 5,422,729 (27,271) Charges for Current Services 300,000 300,500 447,999 147,499 Interest 50,000 50,000 219,265 169,265 Net Decrease in the Fair Value of Investments: - - (97,707) (97,707) Other 30,000 27,500 38,525 11,025

Total Revenues 6,015,000 5,915,450 6,124,820 209,370

Expenditures: Current: General Government - - 65,000 (65,000) Public Services 3,574,310 2,734,650 2,186,422 548,228 Capital Outlay 2,582,150 254,950 108,795 146,155

Total Expenditures 6,156,460 2,989,600 2,360,217 629,383

Excess (Deficiency) of Revenues Over (Under) Expenditures (141,460) 2,925,850 3,764,603 838,753

Other Financing Sources (Uses): Transfers Out (65,000) (65,000) - 65,000

Net Change in Fund Balance (206,460) 2,860,850 3,764,603 903,753

Fund Balance - Beginning of Year 14,221,858 14,221,858 14,221,858 -

Fund Balance - End of Year $ 14,015,398 17,082,708 17,986,461 903,753

145 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Sewer Upgrade For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Sewer Upgrade Fees $ 6,000 6,000 - (6,000) Interest - - 11,521 11,521 Net Decrease in the Fair Value of Investments: - - (4,693) (4,693)

Total Revenues 6,000 6,000 6,828 828

Expenditures: Capital Outlay 855,540 5,000 - 5,000

Total Expenditures 855,540 5,000 - 5,000

Net Change in Fund Balance (849,540) 1,000 6,828 5,828

Fund Balance - Beginning of Year 864,797 864,797 864,797 -

Fund Balance - End of Year $ 15,257 865,797 871,625 5,828

146 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual State Grants For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Subventions and Grants $ 12,095,620 3,978,340 1,532,247 (2,446,093) Interest - - 3,873 3,873 Net Decrease in the Fair Value of Investments: - - (1,655) (1,655)

Total Revenues 12,095,620 3,978,340 1,534,465 (2,443,875)

Expenditures: Current: Public Services - - 81,925 (81,925) Capital Outlay 12,095,620 3,856,830 540,892 3,315,938

Total Expenditures 12,095,620 3,856,830 622,817 3,234,013

Excess (Deficiency) of Revenues Over (Under) Expenditures - 121,510 911,648 790,138

Other Financing Sources (Uses): Transfers Out - (119,440) - 119,440

Net Change in Fund Balance - 2,070 911,648 909,578

Fund Balance - Beginning of Year (1,641,494) (1,641,494) (1,641,494) -

Fund Balance - End of Year $ (1,641,494) (1,639,424) (729,846) 909,578

147 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Traffic Impact For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Traffic Impact Fees $ 80,000 350,300 612,063 261,763 Interest 10,000 5,000 39,931 34,931 Net Decrease in the Fair Value of Investments: - - (16,785) (16,785)

Total Revenues 90,000 355,300 635,209 279,909

Expenditures: Current: General Government - - 65,000 (65,000) Capital Outlay 143,500 46,050 7,591 38,459

Total Expenditures 143,500 46,050 72,591 (26,541)

Excess (Deficiency) of Revenues Over (Under) Expenditures (53,500) 309,250 562,618 253,368

Other Financing Sources (Uses): Transfers Out (803,450) (740,380) (669,960) 70,420

Net Change in Fund Balance (856,950) (431,130) (107,342) 323,788

Fund Balance - Beginning of Year 3,237,969 3,237,969 3,237,969 -

Fund Balance - End of Year $ 2,381,019 2,806,839 3,130,627 323,788

148 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Housing Facilities Fund For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Use of Property $ 2,121,300 2,178,520 2,175,480 (3,040) Interest 15,000 10,000 7,290 (2,710) Net Decrease in the Fair Value of Investments: - - (1,648) (1,648)

Total Revenues 2,136,300 2,188,520 2,181,122 (7,398)

Expenditures: Current: Community Development 1,921,910 1,777,060 1,582,152 194,908 Capital Outlay 399,300 698,420 698,299 121 Debt Service: Principal 85,000 85,000 85,000 - Interest 192,300 194,000 192,483 1,517

Total Expenditures 2,598,510 2,754,480 2,557,934 196,546

Excess (Deficiency) of Revenues Over (Under) Expenditures (462,210) (565,960) (376,812) 189,148

Other Financing Sources (Uses): Transfers In 462,210 483,900 - (483,900)

Net Change in Fund Balance - (82,060) (376,812) (294,752)

Fund Balance - Beginning of Year 1,480,820 1,480,820 1,480,820 -

Fund Balance - End of Year $ 1,480,820 1,398,760 1,104,008 (294,752)

149 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Palmdale Community Foundation For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Other $ - 698,160 369,278 (328,882)

Total Revenues - 698,160 369,278 (328,882)

Expenditures: Current: Health and Welfare - 831,320 379,217 452,103

Total Expenditures - 831,320 379,217 452,103

Excess (Deficiency) of Revenues Over (Under) Expenditures - (133,160) (9,939) 123,221

Other Financing Sources (Uses): Transfers In - 5,310 255,403 250,093

Net Change in Fund Balance - (127,850) 245,464 373,314

Fund Balance - Beginning of Year 257,868 257,686 2,283 (255,403)

Fund Balance - End of Year $ 257,868 129,836 247,747 117,911

150 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Water Park For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Use of Property $ 114,000 135,000 124,541 (10,459) Charges for Current Services 1,017,000 1,120,000 1,096,860 (23,140) Other 40,000 34,440 34,434 (6)

Total Revenues 1,171,000 1,289,440 1,255,835 (33,605)

Expenditures: Current: Cultural and Recreational 1,308,170 1,310,150 1,265,224 44,926

Total Expenditures 1,308,170 1,310,150 1,265,224 44,926

Excess (Deficiency) of Revenues Over (Under) Expenditures (137,170) (20,710) (9,389) 11,321

Other Financing Sources (Uses): Transfers In 137,170 20,710 16,662 (4,048)

Net Change in Fund Balance - - 7,273 7,273

Fund Balance - Beginning of Year - - - -

Fund Balance - End of Year $ - - 7,273 7,273

151 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Debt Service - Palmdale Civic Authority For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Interest $ 9,330 9,200 35,447 26,247 Net Decrease in the Fair Value of Investments - - (5,498) (5,498) Other Agency Contributions - - - -

Total Revenues 9,330 9,200 29,949 20,749

Expenditures: Debt Service: Principal 1,515,000 440,000 440,000 - Interest 1,965,050 1,053,310 1,053,306 4

Total Expenditures 3,480,050 1,493,310 1,493,306 4

Excess (Deficiency) of Revenues Over (Under) Expenditures (3,470,720) (1,484,110) (1,463,357) 20,753

Other Financing Sources (Uses): Transfers In 3,480,050 3,231,040 1,486,836 (1,744,204)

Net Change in Fund Balance 9,330 1,746,930 23,479 (1,723,451)

Fund Balance - Beginning of Year 2,514,745 2,514,745 2,514,745 -

Fund Balance - End of Year $ 2,524,075 4,261,675 2,538,224 (1,723,451)

152 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Debt Service - Palmdale Financing Authority For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Interest $ 20 150 228 78

Total Revenues 20 150 228 78

Expenditures: Debt Service: Principal 515,000 1,495,000 1,495,000 - Interest 227,990 985,730 985,722 8

Total Expenditures 742,990 2,480,730 2,480,722 8

Excess (Deficiency) of Revenues Over (Under) Expenditures (742,970) (2,480,580) (2,480,494) 86

Other Financing Sources (Uses): Transfers In 742,990 742,830 2,475,147 1,732,317

Net Change in Fund Balance 20 (1,737,750) (5,347) 1,732,403

Fund Balance - Beginning of Year 5,379 5,379 5,379 -

Fund Balance - End of Year $ 5,399 (1,732,371) 32 1,732,403

153 City of Palmdale Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual CFD/Assessment Districts For the Year Ended June 30, 2018

Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Interest $ 2,670 25,070 37,169 12,099 Net Decrease in the Fair Value of Investments: - - (83) (83)

Total Revenues 2,670 25,070 37,086 12,016

Expenditures: Current: Public Services 50,000 50,000 2,022 47,978 Capital Outlay 300,500 725,000 723,247 1,753

Total Expenditures 350,500 775,000 725,269 49,731

Net Change in Fund Balance (347,830) (749,930) (688,183) 61,747

Fund Balance - Beginning of Year 4,779,767 4,779,767 4,779,767 -

Fund Balance - End of Year $ 4,431,937 4,029,837 4,091,584 61,747

154 ______

Statement of Fiduciary Net Position and Assets and Liabilities

______

Assessment and Community Facilities District Fund This fund is used to account for receipts and disbursements associated with 1915 Act Assessment Bonds and Special Tax Bonds which are administered by, but are not the liability of, the City.

Retiree Health Premium Trust Funds These funds are used to account for the receipt of City funds held in trust to provide Eligible Retirees with a supplement to reduce their premiums for participating in the City’s Health Plan.

155 City of Palmdale Statement of Fiduciary Assets and Liabilities Assessment and Community Facilities District Agency Funds June 30, 2018

Assets: Receivables: Property Taxes Receivable $ 700,381 Due From Other Governmental Units 1,565 Restricted Assets: Cash and Investments 8,620,881 Interest Receivable 11,839

Total Assets 9,334,666

Liabilities: Accounts Payable 4,120 Due to Other Governmental Units 770,604 Deposits 84,706 Held on Behalf of Others 8,475,236

Total Liabilities $ 9,334,666

156 City of Palmdale Combining Statement of Fiduciary Net Position Retiree Health Premium Trust Funds June 30, 2018

OPEB Trust OPEB Trust Defined Defined Contribution Benefit Plan Plan Total

Assets

Cash and cash equivalents $ 87,352 $ 2,021,992 $ 2,109,344 Investments: Mutal Funds 1,354,324 1,765,044 3,119,368

Total Assets 1,441,676 3,787,036 5,228,712

Liabilities: Accounts Payable 164,066 - 164,066 Total Liabilities 164,066 - 164,066

Total Net Position Restricted for OPEB Benefits $ 1,277,610 $ 3,787,036 $ 5,064,646

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158 ______

Statement of Changes in Fiduciary Net Position and Assets and Liabilities

______

159 City of Palmdale Statement of Changes in Assets and Liabilities Assessment and Community Facilities Districts Agency Funds For the Year Ended June 30, 2018

Balance Balance June 30, 2017 Additions Deletions June 30, 2018

Assets: Receivables: Property Taxes Receivable $ 42,708 $ 700,381 $ 42,708 $ 700,381 Due From Other Governmental Units 1,565 - - 1,565 Restricted Assets: Investments 8,746,342 - 125,461 8,620,881 Interest Receivable 7,002 11,839 7,002 11,839 Total Assets $ 8,797,617 $ 712,220 $ 175,171 $ 9,334,666

Liabilities: Accounts Payable $ 13,878 $ 4,120 $ 13,878 4,120 Due to Other Governmental Units 583,859 186,745 - 770,604 Deposits 84,707 - 1 84,706 Held on Behalf of Others 8,115,173 521,356 161,293 8,475,236 Total Liabilities $ 8,797,617 $ 712,221 $ 175,172 $ 9,334,666

160 City of Palmdale Combining Statement of Changes in Fiduciary Net Position Retiree Health Premium Trust Funds For the Year Ended June 30, 2018

OPEB Trust OPEB Trust Defined Defined Contribution Total OPEB Benefit Plan Plan Trust Funds Additions: Employer Contributions to Retiree Medical Trust $ - $ 164,177 $ 164,177 Investment and Interest Income 73,637 97,449 171,086 Net Realized and Unrealized Gains 48,787 33,747 82,534 Total Additions 122,424 295,373 417,797

Deductions: Benefits Paid to Participants and expenses 238,214 145,428 383,642 Total Deductions 238,214 145,428 383,642

Changes in Net Position (115,790) 149,945 34,155

Net Position Held in Trust at beginning of year 1,393,400 3,637,091 5,030,491

Net Position Held in Trust at end of year $ 1,277,610 $ 3,787,036 $ 5,064,646

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162

Statistical

Section

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

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City of Palmdale

STATISTICAL SECTION

June 30, 2018

This part of the City of Palmdale’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health.

Contents Page

Financial Trends 165 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time.

Revenue Capacity 172 These schedules contain information to help the reader assess the factors affecting the City’s ability to generate its property taxes.

Debt Capacity 177 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future.

Demographic and Economic Information 184 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place and to help make comparisons over time and with other governments.

Operating Information 186 These schedules contain information about the City’s operations and resources to help the reader understand how the City’s financial information relates to the services the City provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

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164 City of Palmdale Net Position by Component Last Ten Fiscal Years (Accrual basis of accounting)

Total Governmental Activities Governmental Net Investment Activities in Net Capital Assets Restricted Unrestricted Position

2009 $ 576,227,953 $ 141,959,138 $ 17,084,191 $ 735,271,282 2010 575,275,003 146,856,238 9,229,647 731,360,888 2011 570,607,898 150,475,636 10,796,604 731,880,138 2012 687,877,989 138,272,965 25,291,390 851,442,344 2013 648,717,242 171,783,181 17,175,066 837,675,489 2014 655,895,266 179,662,667 20,804,395 856,362,328 2015 651,915,581 160,152,582 20,470,245 832,538,408 2016 662,351,171 144,651,291 30,980,820 837,983,282 2017 659,365,081 149,318,498 36,278,228 844,961,807 2018 643,077,802 158,892,011 43,372,746 845,342,559

Source: The information is derived from the Comprehensive Annual Financial Reports for the relevant year. Information prior to the implementation of GASB 34 is not available.

The City Palmdale implemented GASB 63 for the fiscal year ended June 30, 2013. Net Investment in Capital Assets was reported as Invested in Capital Assets, Net of Related Debt and Net Position was reported as Net Assets prior to that.

Note 1: The City of Palmdale does not have any business-type activities to report.

165 City of Palmdale Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting)

2009 2010 2011 2012 Expenses Governmental Activities: General Government $ 19,185,451 $ 30,120,518 $ 18,062,918 $ 16,855,129 Public Safety 27,202,602 21,998,235 21,707,909 21,761,897 Public Services 42,531,740 43,942,305 43,029,300 48,181,827 Community Development 39,966,752 34,169,400 38,275,996 22,039,137 Cultural and Recreational 16,894,235 13,652,211 10,819,142 10,809,922 Health and Welfare 1,240,971 2,004,790 2,338,032 1,861,040 Interest on Long-Term Debt 12,868,534 12,780,665 11,987,929 9,253,632 Total Governmental Activities Expenses 159,890,285 158,668,124 146,221,226 130,762,584

Program Revenues Governmental Activities: Charges for Services: General Government 5,954,230 8,553,972 13,101,053 5,665,531 Public Safety 3,248,263 2,915,485 2,712,950 2,286,012 Public Services 10,173,275 11,845,911 12,869,081 13,835,689 Community Development 4,178,530 4,272,836 4,539,129 4,535,231 Cultural and Recreational 4,796,044 4,549,359 4,345,598 4,581,581 Health and Welfare 320,888 297,947 287,880 274,643 Operating Grants and Contributions 7,223,053 7,454,967 8,568,420 8,932,066 Capital Grants and Contributions 48,552,845 34,558,609 25,479,096 23,057,899 Total Primary Governmental Activities Program Revenues 84,447,128 74,449,086 71,903,207 63,168,652

Net Revenues (Expenses) (75,443,157) (84,219,038) (74,318,019) (67,593,932)

General Revenues and other Changes in Net Position: Governmental Activities: Taxes: Tax Increment (Note 1) 48,020,519 43,025,101 36,535,369 16,474,950 Property Taxes (Note 2) 6,918,844 5,261,215 4,765,792 4,553,208 Sales and Use Taxes 14,448,749 14,104,937 14,921,645 15,177,845 Motor Vehicle in Lieu 14,256,968 12,217,092 10,967,302 10,391,440 Franchise Taxes 4,101,425 3,795,048 4,182,380 4,445,066 Transient Occupancy Taxes 1,517,223 2,581,658 2,633,405 2,788,736 Business License Taxes 455,216 428,916 444,511 480,470 Land Sale Proceeds - - - - Unrestricted Investment Earnings 2,064,949 137,085 241,789 280,195 Other General Revenues 744,262 1,114,030 145,076 233,760 Extraordinary Item-Dissolution of RDA (Note 1) - - - 125,544,368 Total Governmental Activities 92,528,155 82,665,082 74,837,269 180,370,038

Change in Net Position $ 17,084,998 $ (1,553,956) $ 519,250 $ 112,776,106

Note 1: Effective February 1, 2012, all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity. All assets and liabilities of the former Redevelopment Agency of the City of Palmdale was transferred to a Private Purpose Trust Fund to be held until they are distributed to other units of the state and local government. All Tax Increment is reported under a fiduciary Fund statements (Private Purpose Trust Fund). The FY2011-12 extraordinary gain recognized on the Government Wide statements is the net assets and liabilities transferred to the Fiduciary Fund at February 1, 2012. For FY2012-13, the extraordinary loss recognized are assets returned to the Private Purpose Trust Fund as the result of California's Department of Finance review and determination of transfers made prior to the dissolution of the former RDA.

Note 2: The Motor Vehicle in Lieu Taxes include property tax in lieu of VLF revenues. Source: The information is derived from the Comprehensive Annual Financial Reports for the relevant year.

166 City of Palmdale Changes in Net Position, (continued) Last Ten Fiscal Years (Accrual Basis of Accounting)

2013 2014 2015 2016 2017 2018

$ 17,227,290 $ 24,150,674 $ 17,167,502 $ 14,771,775 $ 15,162,734 $ 16,416,215 22,873,718 22,973,910 23,763,312 24,453,097 26,436,495 28,284,134 49,082,866 47,723,268 51,743,421 53,165,326 51,989,170 55,006,590 6,480,832 5,418,368 5,852,056 7,900,247 8,715,698 7,584,015 9,732,400 10,863,071 9,878,585 9,704,499 10,405,253 11,463,299 1,402,424 2,830,718 2,170,541 3,000,567 3,626,698 1,895,396 5,624,571 5,152,837 4,953,848 6,116,645 3,948,940 3,327,586 112,424,101 119,112,846 115,529,265 119,112,156 120,284,988 123,977,235

8,912,099 8,451,711 5,272,710 5,967,654 6,095,516 6,716,003 2,394,095 2,462,495 2,411,614 3,478,453 3,188,196 2,687,364 13,044,551 13,521,227 16,223,970 16,469,772 16,853,232 17,545,979 5,227,628 5,173,147 4,798,108 6,541,258 6,674,317 6,775,750 4,628,582 4,820,809 5,157,093 5,226,101 5,320,091 5,255,553 245,701 275,289 198,531 344,932 354,054 311,587 9,142,066 12,637,721 14,681,296 9,206,823 9,058,728 8,540,307 19,661,447 35,822,039 38,039,564 29,098,236 30,874,206 23,778,358

63,256,169 83,164,438 86,782,886 76,333,229 78,418,340 71,610,901

(49,167,932) (35,948,408) (28,746,379) (42,778,927) (41,866,648) (52,366,334)

------4,831,816 5,269,406 6,098,318 6,154,152 7,026,181 7,689,753 15,649,190 16,396,713 17,084,411 19,186,043 18,577,244 19,267,083 10,400,447 10,651,753 11,484,571 12,523,079 13,062,518 13,925,859 4,556,419 5,847,596 5,526,119 5,562,090 5,352,221 5,463,623 2,907,995 2,824,182 3,089,802 3,278,724 3,716,154 4,028,350 468,830 515,815 551,202 569,381 589,805 628,303 - - - - - 133,981 (136,096) 391,725 260,322 537,396 (71,826) 519,275 270,275 274,312 288,740 412,936 592,876 594,975 (3,547,799) 10,346,241 - - - - 35,401,077 52,517,743 44,383,485 48,223,801 48,845,173 52,251,202

$ (13,766,855) $ 16,569,335 $ 15,637,106 $ 5,444,874 $ 6,978,525 $ (115,132)

167 City of Palmdale Fund Balance, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting)

The Following Fund Balances are classified in compliance to GASB 54:

2009 2010 2011

General Fund General Fund Reserved $ 5,368,215 $ 5,363,834 Nonspendable $ 4,180,275 Unreserved 22,767,287 18,112,832 Restricted - Assigned 7,672,148 Unassigned 17,472,584

Total General Fund 28,135,502 23,476,666 Total General Fund 29,325,007

All Other Governmental Funds All Other Governmental Funds Reserved 54,717,638 60,764,046 Nonspendable 599,434 Unreserved, Reported In: Restricted 140,356,828 Special Revenue Funds 59,908,666 54,659,643 Assigned 13,865,470 Capital Projects Funds 31,700,086 23,226,199 Unassigned (20,001,075) Debt Service Funds - - Total All Other Governmental Funds 134,820,657

Total All Other Governmental Funds 146,326,390 138,649,888 Total Governmental Funds $ 164,145,664

Total Governmental Funds $ 174,461,892 $ 162,126,554

The information is derived from the Comprehensive Annual Financial Reports for the relevant year.

FY2010-11 is the first year that the City implemented GASB issued Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions . The City chose not to restate the prior year information.

180.00 All Other Government Funds General Fund 167

160.00 155.10 151.60 149 146.33 148.40 138.65 139.30 140.00 134.82 131.00

120.00

100.00

80.00

62 57 60.00 51.75

40.90 43.04 38.53 40.00 Millions)(In 28.14 29.33 29.66 23.48

20.00

0.00 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18

168 City of Palmdale Fund Balance, Governmental Funds, (continued) Last Ten Fiscal Years (Modified Accrual Basis of Accounting)

The Following Fund Balances are classified in compliance to GASB 54:

2012 2013 2014 2015 2016 2017 2018

General Fund Nonspendable $ 4,685,548 $ 10,574,731 $ 10,491,577 $ 10,884,095 $ 11, 433,344 $ 10, 889,726 $ 11,072,269 Restricted 2,917,536 4,135,688 3,053,154 3, 004,896 3,363,298 3,433,942 3,507,069 Assigned 5,639,221 5,432,558 5,717,857 11, 946,745 7,816,109 10, 808,898 11,838,025 Unassigned 16,415,346 18,391,993 21,637,632 17, 200,108 29, 139,751 31, 648,004 35,914,833 . Total General Fund 29,657,651 38,534,970 40,900,220 43, 035,844 51, 752,502 56, 780,570 62,332,196

All Other Governmental Funds Nonspendable ------Restricted 142,828,907 147,398,476 163,742,301 169,737,885 165, 219,475 164, 464,462 179,943,144 Assigned 13,643,822 ------Unassigned (17,187,366) (16,444,270) (15,388,578) (14,667,579) (13,624,754) (15,208,273) (13,373,212)

Total All Other Governmental Funds 139,285,363 130,954,206 148,353,723 155,070,306 151, 594,721 149, 256,189 166,569,932

Total Governmental Funds $ 168,943,014 $ 169,489,176 $ 189,253,943 $ 198,106,150 $ 203, 347,223 $ 206, 036,759 $ 228,902,128

Note: The information is derived from the Comprehensive Annual Financial Reports for the relevant year.

FY2010-11 is the first year that the City implemented GASB issued Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions . The City chose not to restate the prior year information.

FUND BALANCES Fiscal Year Ended June 30, 2018

General Fund 27%

All Other Governmental Funds 73%

169 City of Palmdale Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years Modified Accrual Basis of Accounting - Audited

2009 2010 2011 2012

Revenues: Taxes (see page 180) $ 92,059,450 $ 83,783,678 $ 77,274,996 $ 58,488,094 Subventions and Grants 14,968,117 15,968,036 21,721,531 18,185,576 Fees and Charges 18,261,796 15,855,734 20,087,670 13,776,125 Licenses and Permits 2,114,087 1,942,445 1,810,522 1,574,855 Special Assessments 10,825,548 13,375,425 14,019,785 13,998,835 Interfund Interest - - - 570,935 Interest 3,896,529 976,511 957,706 750,011 Successor Agency Contributions - - - - Capital Contributions 1,468,992 296,693 239,995 328,515 Net Increase (Decrease) in the Fair Value of Investments: 390,484 (395,472) (176,960) 69,767 Other revenue 2,401,536 4,205,689 5,421,695 3,825,141 Total Revenues 146,386,539 136,008,739 141,356,940 111,567,854

Expenditures: Current: General Government 18,020,219 18,478,189 15,544,789 16,049,708 Public Safety 22,865,674 21,898,106 21,690,842 21,638,652 Public Services 18,452,277 20,462,591 17,791,923 17,241,488 Community Development 11,811,091 23,755,350 19,093,766 13,705,233 Cultural and Recreational 15,923,788 12,897,447 9,611,612 9,484,918 Health and Welfare 1,246,003 2,017,575 2,335,940 1,853,032 Intergovernmental - Tax Sharing 26,522,289 9,501,128 17,449,701 8,289,166 Intergovernmental - ERAF - 11,605,102 2,389,286 - Capital Outlay 26,023,665 14,253,471 14,572,641 13,489,752 Debt service: Principal 6,448,665 7,200,485 7,258,139 7,080,489 Interfund Interest - - - 570,935 Interest 12,391,397 12,053,242 11,599,191 8,431,895 Cost of Issuance 320,683 3,724 - -

Total Expenditures 160,025,751 154,126,410 139,337,830 117,835,268

Excess (Deficiency) of Revenues Over (Under) Expenditures (13,639,212) (18,117,671) 2,019,110 (6,267,414)

Other Financing Sources (Uses): Capital Lease Proceeds - - - - Gain (Loss) on Resale Land - 310,632 - - Issuance of Notes - 2,200,000 - - Issuance of Bonds 6,380,000 - - - Payments to Refunded Bond Escrow (6,149,500) - - - Debt Issuance Premiums (Discounts) 33,398 - - - Transfers In 71,782,468 49,118,864 71,537,568 16,092,930 Transfers Out (71,782,468) (49,118,864) (71,537,568) (16,092,930)

Total Other Financing Sources (Uses) 263,898 2,510,632 - -

Extraordinary Items: Extraordinary Gain (Loss) Upon Dissolution of the Redevelopment Agency - - - 4,278,664

Net Change in Fund Balances $ (13,375,314) $ (15,607,039) $ 2,019,110 $ (1,988,750)

Debt service as a percentage of noncapital expenditures 16.94% 18.41% 15.36% 15.56%

Source: City of Palmdale, Finance Department and Audited Annual Financial Reports

170 City of Palmdale Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years Modified Accrual Basis of Accounting - Audited

2013 2014 2015 2016 2017 2018

$ 42,329,440 $ 46,089,020 $ 48,122,305 $ 50,600,450 $ 51,283,788 $ 54,229,982 15,156,355 18,645,952 21,563,749 25,690,529 26,057,852 28,470,216 17,248,834 22,906,797 14,528,075 18,823,349 18,711,910 18,692,915 1,513,526 1,652,670 1,802,758 2,539,507 2,667,827 2,180,693 14,179,059 14,402,577 17,269,746 17,227,611 17,579,851 18,204,324 661,662 636,401 606,114 577,052 543,708 516,103 601,227 683,854 830,588 1,342,135 1,695,340 2,260,381 3,553,656 3,389,127 5,758,733 17,265,417 41,258 35,953 443,774 315,299 11,358,487 463,304 153,796 126,153

(736,165) 480,776 21,262 320,522 (1,648,795) (941,708) 3,556,653 4,227,192 3,939,117 4,218,962 4,483,380 3,925,523 98,508,021 113,429,665 125,800,934 139,068,838 121,569,915 127,700,535

16,049,207 19,285,105 19,755,437 14,681,150 15,276,501 15,629,948 22,692,501 22,926,361 23,904,831 24,785,404 26,793,853 28,107,228 16,929,292 17,238,982 21,215,460 22,095,709 20,952,691 20,980,917 5,962,701 4,874,350 5,119,951 7,242,971 7,229,495 6,566,458 8,899,259 9,963,444 9,121,236 9,206,904 9,736,509 10,086,436 1,388,304 2,824,602 2,178,496 3,031,167 3,650,042 1,872,018 ------12,456,560 10,777,668 25,664,366 28,470,675 26,733,173 25,935,646

13,623,679 4,453,442 30,144,672 5,433,042 3,391,747 3,425,667 661,662 636,401 606,114 577,052 543,708 516,103 5,506,918 5,139,543 4,950,664 4,627,754 3,663,254 3,348,492 320,404 - 207,500 361,287 383,662 157,280

104,490,487 98,119,898 142,868,727 120,513,115 118,354,635 116,626,193

(5,982,466) 15,309,767 (17,067,793) 18,555,723 3,215,280 11,074,342

1,345,884 - - 1,234,862 - 14,161 - - - - - 377,481 ------8,695,000 - 25,920,000 4,235,000 17,475,000 11,397,102 - - - (18,784,512) (19,420,000) - 35,543 - - - 1,419,256 - 25,593,919 11,001,936 34,083,575 8,824,216 29,471,537 8,153,168 (25,593,919) (11,001,936) (34,083,575) (8,824,216) (29,471,537) (8,153,168)

10,076,427 - 25,920,000 (13,314,650) (525,744) 11,788,744

(3,547,799) - - - - -

$ 546,162 $ 15,309,767 $ 8,852,207 $ 5,241,073 $ 2,689,536 $ 22,863,086

22.01% 15.07% 31.36% 13.21% 9.87% 12.35%

171 City of Palmdale General Governmental Tax Revenues by Source Last Ten Fiscal Years

Property and Business Transient Real Property Fiscal Tax Increment Sales and License Franchise Gasoline Occupancy Transfer a b Year Revenue Use Taxes Tax Tax Tax Tax Tax Total

2008-09 $ 68,258,192 $ 14,448,749 $ 455,216 4,101,425$ $ 2,845,711 $ 1,517,223 $ 432,934 $ 92,059,450

2009-10 59,618,703 14,104,937 428,916 4,143,990 2,465,611 2,581,658 439,863 83,783,678

2010-11 51,265,821 14,921,645 444,511 4,182,380 3,527,274 2,633,405 299,960 77,274,996

2011-12 31,041,261 15,177,845 480,470 4,445,066 4,252,237 2,788,736 302,479 58,488,094

2012-13 14,791,598 15,649,190 468,830 4,556,419 3,593,343 2,907,995 362,065 42,329,440

2013-14 15,478,125 16,396,713 515,815 5,847,596 4,649,226 2,824,182 377,364 46,089,021

2014-15 17,152,560 17,084,411 551,202 5,526,119 4,351,675 3,089,802 366,535 48,122,304

2015-16 18,118,214 19,186,043 569,381 5,562,090 3,392,713 3,278,724 493,284 50,600,449

2016-17 19,514,208 18,577,244 589,805 5,352,221 3,031,375 3,716,154 502,781 51,283,788

2017-18 20,983,338 19,267,083 628,303 5,463,623 3,310,498 4,028,350 548,787 54,229,982

Change 2009-2018 -69.26% 33.35% 38.02% 33.21% 16.33% 165.51% 26.76% -41.09% a The City's property and tax increment revenue has increased over the last ten years due to the increases in the City's population and housing boom However, the City has a signficant decrease in 2012-13 as the result of the dissolution of all California Redevelopment Agencies during 2011-12. The Tax Increment previously reported under the City of Palmdale's Redevelopment Agency, a component unit of the City of Palmdale, is now reported under a Private Purpose Trust Fund effective February 1, 2012. b Transient Occupancy Tax has increased by 165.51 percent as the result of two additional hotels opening since 2008-09.

Source: City of Palmdale, Finance Department

172 City of Palmdale Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years

Secured Property Fiscal Residential Commercial Industrial Dry Farm Government Institutional Irrigated Miscellaneous Recreational Year Property Property Property Property Property Property Property Property Property

2008-09 $ 9,101,255,548 $ 1,017,018,256 $ 492,793,582 $ 2,883 $ 166,177 $ 100,743,049 $ 2,287,961 $ 933,341 $ 28,452,126 2009-10 7,208,273,579 1,193,472,284 513,268,931 2,940 169,500 91,841,308 2,332,151 952,006 28,990,541 2010-11 6,073,657,484 1,241,078,807 502,857,156 2,932 127,500 91,029,408 2,299,903 949,748 28,415,152 2011-12 6,253,123,516 1,247,918,809 499,582,507 2,953 127,500 141,963,630 2,062,267 956,897 29,731,246 2012-13 6,090,761,455 1,272,332,319 503,277,273 3,011 127,500 143,862,691 2,102,483 2,844,875 30,041,270 2013-14 6,272,332,777 1,297,491,324 470,738,935 3,070 273,000 218,014,208 2,143,503 3,254,005 30,562,607 2014-15 7,077,476,628 1,327,043,593 371,182,157 3,083 292,000 222,889,982 2,152,995 5,245,552 30,665,697 2015-16 7,635,291,990 1,365,232,525 511,346,775 3,144 452,000 225,436,801 2,386,169 3,365,234 31,833,238 2016-17 8,037,144,588 1,420,981,536 538,952,556 3,191 - 243,902,415 2,422,533 5,191,041 32,269,300 2017-18 8,533,219,339 1,469,739,955 591,126,895 3,254 - 255,229,741 2,470,953 5,416,084 35,235,135

Secured Property Total Taxable Total Direct Estimated Fiscal Vacant Land Cross Reference Exempt Unknown Total SBE Nonunitary Unsecured Assessed Tax Actual Year Property Property Property Property Secured Property Property Value Rate Taxable Value

2008-09 $ 1,000,133,941 $ 160,491,656 $ (71,343,928) $ - $ 11,832,934,592 $ 1,950,352 $ 308,284,491 $12,143,169,435 0.42380% $ -

173 2009-10 954,247,833 166,240,555 (76,284,071) - 10,083,507,557 1,877,452 331,325,052 10,416,710,061 0.44557% - 2010-11 701,909,214 157,088,446 (78,398,849) 6,022 8,721,022,923 1,601,400 337,572,964 9,060,197,287 0.45828% - 2011-12 584,249,065 148,423,521 (83,267,879) 6,000 8,824,880,032 963,200 273,267,652 9,099,110,884 0.46508% - 2012-13 548,640,377 160,682,096 (79,247,893) 6,000 8,675,433,457 963,200 373,414,517 9,049,811,174 0.46508% - 2013-14 549,530,339 157,243,314 (78,516,112) 6,000 8,923,076,970 963,200 354,680,993 9,278,721,163 0.07637% - 2014-15 558,074,395 174,080,817 (78,416,749) 6,000 9,690,696,150 963,200 362,362,996 10,054,022,346 0.07933% - 2015-16 577,190,707 200,289,742 (75,198,398) 6,000 10,477,635,927 963,200 415,364,218 10,893,963,345 0.07867% - 2016-17 605,292,964 176,381,014 (75,989,372) 6,000 10,986,557,766 963,200 392,307,216 11,379,828,182 0.07878% - 2017-18 652,028,634 201,337,611 (68,143,060) 6,000 11,677,670,541 836,266 448,141,048 12,126,647,855 0.07858% -

Note 1: Exempt values are not included in total taxable assessed value

Note 2: In 1978 the voters of the State of California passed Proposition 13 which limited taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year the assessed value of property may be increased by an "inflation factor" (limited to a maximum of 2%). With few exceptions, property is only reassessed as a result of new construction activity or at the time it is sold to a new owner. At that point, the property is reassessed based upon the added value of the construction or at the purchase price (market value) or economic value of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above.

Data Source: L.A County Assessor 2008/09 - 2017/18 Combined Tax Rolls City of Palmdale Direct and Overlapping Propety Tax Rates Last Ten Fiscal Years (Rate per $100 of Taxable Value)

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Basic Levy1 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% 1.00000% Acton-Agua Dulce USD DS 2008 Series A 0.00000% 0.02178% 0.03150% 0.03523% 0.03390% 0.03271% 0.03386% 0.03538% 0.03886% 0.03652% Antelope Valley Community College 0.01682% 0.02459% 0.02539% 0.02599% 0.02949% 0.02740% 0.02480% 0.02556% 0.02560% 0.04869% Antelope Valley Union High 0.02095% 0.02421% 0.02902% 0.02913% 0.03075% 0.02602% 0.02585% 0.02428% 0.02474% 0.02357% Antelope Valley East Kern Water Agency 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% 0.07049% Eastside Union School District 0.05789% 0.06700% 0.08172% 0.08149% 0.08302% 0.08677% 0.08893% 0.08176% 0.08449% 0.08029% Lancaster School District 0.01855% 0.02282% 0.03061% 0.03074% 0.03380% 0.05503% 0.04837% 0.05449% 0.05511% 0.06398% Palmdale School District 0.01827% 0.01988% 0.02337% 0.02323% 0.02527% 0.04839% 0.04591% 0.04973% 0.03819% 0.07534% Palmdale Water District 0.12593% 0.31737% 0.31356% 0.29166% 0.33361% 0.32898% 0.34586% 0.29922% 0.27726% 0.26591% Westside Union School District 0.01729% 0.03359% 0.05571% 0.05062% 0.05526% 0.05615% 0.08166% 0.08107% 0.07929% 0.07904% 2 Total Direct & Overlapping Tax Rates 1.34618% 1.60175% 1.66136% 1.63859% 1.69559% 1.73195% 1.76574% 1.72199% 1.69404% 1.74381%

City Share of 1% Levy per Prop 133 0.06629% 0.06629% 0.06629% 0.06629% 0.06629% 0.06629% 0.10374% 0.10374% 0.10374% 0.10374%

General Obiligation Debt Rate 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000%

Redevelopment Rate4 1.07049% 1.07049% 1.07049% 1.07049% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 174

Total Direct Rate5 0.42380% 0.44557% 0.45828% 0.46508% 0.43604% 0.07637% 0.07933% 0.07867% 0.07878% 0.07858%

Notes:

1In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values fo the payment of any approved bonds.

2Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overlapping rates apply to all city property owners.

3 City's share of 1% levy is based on the City's share of the general fund tax rate area with the largest net taxable value with the City. ERAF general fund tax shifts may not be included in tax ratio figures

4RDA rate is based on the largest RDA tax rate area (TRA) and includes only rate(s) from indebtedness adopted prior to 1989 per California State statue. RDA direct and overlapping rates are applied only to the incremental property values. Effective February 1, 2012, all California Redevelopment Agencies were dissolved.

5Total direct rate is the weighted average of all individual direct rates and applied by the City of Palmdale.

Data Source: L.A. County Assessor 2008/09 - 2017/18 Tax Rate Table City of Palmdale Principal Property Tax Payers Current Year and Nine Years Ago

2017-18 2008-09 Percentage Percentage Taxable of Total City Taxable of Total City Assessed Taxable Assessed Taxable Taxpayer Value Assessed Value Value Assessed Value

Lockheed Corporation $ 434,080,808 3.56% $ 355,670,442 2.91% Lancaster Hospital Corporation 231,459,230 1.90% 0.00% Northrop Grumman Systems Corporation 194,381,768 1.59% 77,087,288 0.63% Antelope Valley Mall LLC 118,976,436 0.98% 114,536,331 0.94% MGP X Properties LLC 97,551,411 0.80% 0.00% Wal Mart Real Estate Business Trust/Sam's West I 72,510,552 0.59% 75,368,962 0.62% Time Warner Cable 56,997,784 0.47% 39,730,480 0.33% Golden Spectrum Property LLC 43,538,420 0.36% 0.00% Target Corporation 39,861,655 0.33% 33,525,749 0.27% Ritter Holdings LLC 34,396,400 0.28% 0.00% Palmdale Hills Property 0.00% 78,550,264 0.64% Universal Health Services of Palmdale 0.00% 73,289,460 0.60% Federal Deposit Insurance Corporation 0.00% 37,093,577 0.30% Amargosa Palmdale Investments LLC 0.00% 35,596,299 0.29%

Top Ten Total 1,323,754,464 10.86% 920,448,852 7.54%

Total City Taxable Assessed Value $ 12,194,790,915 100.00% $ 12,214,513,363 100.00%

Source: HdL Coren & Cone, Los Angeles County Assessor 2017/18 and 2008/09 Combined Tax Rolls

175 City of Palmdale City Property Tax Levies and Collections Last Ten Fiscal Last Ten Fiscal Years

Fiscal Total Year City Property Tax Subsequent Collections Collections Refunds % of Supplemental Redemption Adjustments Levy (1) Collections (2) Levy (3) (4) (5) % of Levy 2008-09 $ 6,762,465 $ 5,592,424 82.70% $ 394,922 $ 211,630 $ (10, 742) $ 6,188,234 91.51% 2009-10 5,225,565 4,764,653 91.18% 131,963 226,253 (55,222) 5,067,647 96.98% 2010-11 4,582,321 4,191,087 91.46% 145,044 165,780 70,326 4,572,236 99.78% 2011-12 4,569,196 4,045,607 88.54% 153,788 114,549 101,781 4,415,725 96.64% 2012-13 4,702,797 4,168,372 88.64% 198,103 102,478 119,284 4,588, 238 97.56% 2013-14 4,866,006 4,295,755 88.28% 323,668 79,763 118,794 4,817, 980 99.01% 176 2014-15 5,181,707 4,561,031 88.02% 159,671 54,300 338,739 5,113,742 98.69% 2015-16 5,564,458 4,851,602 87.19% 186,674 60,744 362,953 5,461,974 98.16% 2016-17 5,402,998 4,987,980 92.32% 140,425 61,470 155,603 5,345,477 98.94% 2017-18 5,828,578 5,228,633 89.71% 147,686 55,389 324,312 5,756,019 98.76% (1) Billings represents the Secured, Unsecured, and Homeowners Property Tax billed amounts for each fiscal year. (2) Collections represents the Secured, Unsecured, and Homeowners Property Tax collected amounts for each fiscal year. (3) SB813 requires than a supplemental assessment be enrolled for the amount of the difference in value between regular assessment roll and the new fair market value after a change of ownership. The Supplemental figures were taken from LA County remittances and may include supplemental amounts from prior fiscal years. (4) Redemption collections represent tax-defaulted secured property taxes that were unpaid at the end of a fiscal year. The Redemption figures were taken from LA County remittances and may include redemption amounts from prior fiscal years. (5) Refunds represent overpayments of taxes due because of a decrease in value; whereas adjustments represent changes to the tax roll. The Refund and Adjustment figures were taken from LA County remittances and may include refunds and/or adjustments from prior fiscal years. City of Palmdale Ratios of Outstanding Debt by Type Last Ten Fiscal Years

Certificates Tax Bond Other Total Percentage Fiscal of Allocation Anticipation Revenue Capital Notes Governmental of Personal Per Year Participation Bonds A Note Bonds Leases Payable Activities Income (1) Capita (1)

2009 $ 81,180,479 $ 91,490,186 $ - $ 30,498,952 $ 2,331,651 $ 37,915,317 $ 243,416,585 7.75% 1,614$ 2010 79,777,320 90,607,264 - 28,987,709 1,411,759 38,224,725 239,008,777 8.97% 1,566 2011 78,260,915 89,612,082 - 27,302,575 625,507 36,516,156 232,317,235 8.19% 1,511 2012 78,663,861 - - 25,203,459 149,214 8,233,768 112,250,302 3.93% 726 2013 67,773,873 - - 32,356,201 1,219,846 7,665,342 109,015,262 3.77% 705 2014 66,537,300 - - 30,392,752 962,260 7,084,485 104,976,797 3.63% 674 2015 65,097,544 - - 28,337,814 697,150 6,474,923 100,607,431 3.32% 629 2016 62,879,049 - - 12,440,000 1,636,893 6,117,000 83,072,942 2.76% 524

177 2017 41,160,000 - - 30,736,782 1,310,146 5,862,000 79,068,928 2.53% 498 2018 39,815,000 - - 28,901,224 1,091,639 17,614,522 87,422,385 2.80% 550

Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.

AA decrease in Tax Allocation Bonds reported is the direct result of the dissolution of all California Redevelopment Agencies during 2011-12. The Debt previously reported under the City of Palmdale's Redevelopment Agency, a component unit of the City of Palmdale, is now being reported under a Private Purpose Trust Fund effective February 1, 2012.

(1) These ratios are calculated using per capita personal income and population for the prior calendar year provided by HdL, Coren & Cone

Source: City of Palmdale, Finance Department City of Palmdale Ratio of General Bonded Debt Outstanding Last Ten Fiscal Years Percent Tax Allocation Revenue* Percent of Per a Fiscal Year Bonds Bonds Total Assessed Value (1) Capita 2009 $ 91,490,186 $ 30,498,952 $ 121,989,138 1.00% 809$ 2010 90,607,264 28,987,709 119,594,973 1.16% 784 2011 89,612,082 27,302,575 116,914,657 1.29% 761 2012 - 25,203,459 25,203,459 0.28% 163 2013 - 32,356,202 32,356,202 0.36% 209 2014 - 30,392,752 30,392,752 0.33% 195 2015 - 28,337,814 28,337,814 0.28% 177 2016 - 8,205,000 8,205,000 0.08% 52 b 2017 - 25,180,000 25,180,000 0.22% 158 2018 - 23,685,000 23,685,000 0.20% 149

Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 178

General bonded debt is debt payable with governmental fund resources recorded in Palmdale Financing Authority (of which the City has none).

(1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California.

aA decrease in Tax Allocation Bonds reported is the direct result of the dissolution of all California Redevelopment Agencies during 2011-12. The Debt previously reported under the City of Palmdale's Redevelopment Agency, a component unit of the City of Palmdale, is now being reported under a Private Purpose Trust Fund effective February 1, 2012.

bA increase in total Revenue Bonds reported in 2017 as compared to 2016 is the result of refunding revenue bonds issued to pay off certificates of participation during 2016-17.

*During FY2012-13, $8,695,000 Lease Revenue Bonds were issued. City of Palmdale Direct and Overlapping Governmental Activities Debt June 30, 2018

City Assessed Valuation $ 7,220,615,584 Redevelopment Agency Incremental Valuation 4,974,175,331 Total Assessed Valuation $ 12,194,790,915

Estimated Share Gross Bonded Percentage of Overlapping OVERLAPPING DEBT: Debt Balance Applicable Debt 308.60-Palmdale Water District $ 21,803,955 91.155% 19,875,409 464.50-Eastside Union Elem School District 1998 Series A Debt Service 1,439,745 14.559% 209,615 464.54-Eastside Union School District Debt Service 2016 REF 4,855,000 14.559% 706,849 529.50-Lancaster School District Debt Service 1999 Series A 3,314,669 0.630% 20,893 529.51-Lancaster School District Debt Service 1999 Series 2001 7,773,815 0.630% 48,999 529.53-Lancaster School District Debt Service 2012 Series 2013A Bond 17,205,000 0.063% 108,444 529.54-Lancaster School District Debt Service 2012 Series 2013B Bond 11,490,000 0.630% 72,422 529.55-Lancaster School District Debt Service 2012 Series 2018C 11,000,000 0.630% 69,334 593.53-Palmdale School District Debt Service 2010 Ref Bonds 11,194,604 94.584% 10,588,298 593.54-Palmdale School District Debt Service 2012 Series 2013A Bonds 40,985,000 94.584% 38,765,230 593.55-Palmdale School District Debt Service Ref Series 2013B Bonds 2,340,000 94.584% 2,213,264 593.56-Palmdale School District Debt Service Ref Series 2015B 25,350,000 94.584% 23,977,030 593.57-Palmdale School District Debt Service Ref Series 2017A 28,500,000 94.584% 26,956,424 689.54-Westside Union School District 1998 Series A Debt Service 2,971,565 40.463% 1,202,378 689.55-Westside Union School District 1998 Series S-2001 A Debt Service 2,752,290 40.463% 1,113,653 689.56-Westside Union School District 1998 Series S-2002 A Debt Service 2,149,900 40.463% 869,909 689.61-Westside Union School Discrict 2008 Series A Debt Service 8,964,852 40.463% 3,627,429 689.62-Westside Union School District Debt Service 2008 Series B 29,388,931 40.463% 11,891,580 689.63-Westside Union School District Debt Service 2012 Series A 11,770,000 40.463% 4,762,470 689.64-Westside Union School District Debt Service 2012 Series B 1,720,000 40.463% 695,960 717.54-Antelope Valley Unified High School District Refund SR 2012 54,525,000 41.719% 22,747,276 717.55 Antelope Valley Union High School District Refund 2015 4,504,873 41.719% 1,879,387 792.55-Antelope Valley CCD Debt Service 2014 Ref Series A 42,290,000 39.089% 16,530,819 792.56-Antelope Valley CCD Debt Service 2014 Ref Series B 13,625,000 39.089% 5,325,902 792.57-Antelope Valley CCD Debt Service 2015 Ref 77,683,682 39.089% 30,365,924 792.59-Antelope Valley CCD Debt Service 2016 Series A 150,000,000 39.089% 58,633,788 935.52-Action-Agua Dulce USD 2008 Debt Service Series A 5,135,664 0.007% 351 935.53-Action-Agua Dulce USD DS 2016 7,055,000 0.007% 482 TOTAL OVERLAPPING DEBT $ 283,259,519 City of Palmdale's Direct Debt $ 87,153,820

Total Direct and Overlapping Debt $ 370,413,339

Notes:

This report reflects debt which is being repaid through voter-approved property tax indebtedness. It excludes mortgage revenue, tax allocation bonds, interim financing obligations, non-bonded capital lease obligations, and certificates of participation.

Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City of Palmdale. The percentage of overlapping debt applicable is estimated by using taxable assessed values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. Data Source HDL Coren & Cone, L. A. County Assessor and Auditor Combined 2016/17 Lien Date Tax Rolls.

179 City of Palmdale Legal Debt Margin Information Last Ten Fiscal Years

Total Debt Total Net Debt Applicable to the Assessed Debt Limit Applicable to the Limit as a Percentage Fiscal Year Evaluation (1) Limit (2) of Debt Limit

2008-09 $ 12,214,513,363 $ 458,044,251 $ 121,989,138 26.63%

2009-10 10,392,994,132 389,737,280 119,594,973 30.69%

2010-11 9,138,596,136 342,697,355 116,914,657 34.12%

2011-12 9,182,378,763 344,339,204 111,397,152 32.35%

2012-13 9,129,059,067 342,339,715 116,925,374 34.15%

2013-14 9,357,237,275 350,896,398 115,840,632 33.01%

2014-15 10,380,860,342 389,282,263 112,074,317 28.79%

2015-16 10,969,161,743 411,343,565 121,994,744 29.66%

2016-17 11,455,817,554 429,593,158 121,593,787 28.30%

2017-18 12,194,790,915 457,304,659 114,426,984 25.02%

Source: Los Angeles County

Note (1): The legal debt limit is statutorily computed at 3.75% of assessed valuation. Amounts applicable to the former Community Redevelopment Agency of the City of Palmdale are included in years 2002-03 through 2010-11. Note (2): Total net debt applicable to the limit includes Tax Allocation Bonds and Revenue Bonds. Note (3): The aggregate principal amount of the City's general obligation debt for public improvements is statutorily limited to 15.0 percent of the City's total reported assessed valuation. The City has no general obligation debt outstanding as of June 30, 2018.

180 City of Palmdale Former Community Redevelopment Agency - Project Area 1 & 1 A Pledged-Revenue Coverage Last Ten Fiscal Years

1993 Revenue Bonds 2003 Revenue Bonds 19.2 2003 Bond Anticipation NP 2009 Note Payable 6.0 Debt Service (1) Debt Service (3) Debt Service (2) Debt Service (4) Fiscal Year Principal Interest Principal Interest Principal Interest Principal Interest

2009 $ 660,000 - $ 110,000 $ 761,800 - $ 345,000 - - 2010 660,000 - 115,000 758,700 - - - $ 226,493 2011 660,000 - 115,000 755,106 - - $ 60,000 391,931 2012 - - 780,000 737,638 - - 95,000 386,843 2013 - - 810,000 705,837 - - 100,000 380,442 2014 - - 845,000 672,737 - - 105,000 373,713 2015 - - 875,000 638,338 - - 115,000 366,491 2016 - - 910,000 602,638 - - 125,000 358,613 2017 ------2018 ------

2011 Tax Allocation Note 27.5 Debt Service (5) Debt Summary Pledged Revenue

Fiscal Total Debt Gross Tax Less: Operating Year Principal Interest Total Principal Total Interest Service Increment (6) Expenses (7) Net Available Coverage

2009 - - $ 770,000 $ 1,106,800 $ 1,876,800 $ 7,861,714 $ 2,036,582 $ 5,825,132 3.10 2010 - - 775,000 985,193 1,760,193 7,981,001 1,943,519 6,037,482 3.43 2011 $ 996,586 $ 1,888,762 1,831,586 3,035,799 4,867,385 4,797,340 1,261,631 3,535,709 0.73 2012 1,120,714 1,629,947 1,995,714 2,754,428 4,750,142 8,217,166 274,933 7,942,233 1.67 2013 1,190,968 1,559,692 2,100,968 2,645,971 4,746,939 9,961,671 356,493 9,605,178 2.02 2014 1,265,627 1,485,033 2,215,627 2,531,483 4,747,110 8,696,225 341,547 8,354,678 1.76 2015 1,344,967 1,405,693 2,334,967 2,410,522 4,745,489 8,956,435 327,804 8,628,631 1.82 2016 1,429,282 1,321,378 2,464,282 2,282,629 4,746,911 9,245,959 352,357 8,893,602 1.87 2017 1,518,883 1,231,777 1,518,883 1,231,777 2,750,660 9,666,704 393,523 9,273,181 3.37 2018 1,614,102 1,136,558 1,614,102 1,136,558 2,750,660 10,236,117 402,461 9,833,656 3.58

Note: Details regarding the City's debt and the Successor Agency to the former Community Redevelopment Agency's debt can be found in the notes

Note: As the result of the dissolution of the former Community Redevelopment Agency, the debt listed on this schedule has been assumed by the Successor Agency of the Former Community Redevelopment Agency. The debt has been approved by the State Department of Finance as an enforceable obligation and will be paid from future tax revenues received by the Private Purpose Trust Fund. (Note 19) Source: City of Palmdale, Finance Department

(1) Revenue Bonds were fully matured and paid off in FY 2011. (2) 2003 Bond Anticipation Note was fully defeased in June 2009 by the CRA Loan associated with the 2009 Revenue Bonds. (3) 2003 Revenue Bonds were fully defeased in April 2016 by the Successor Agency 2016 Series A Tax Allocation Refunding Bonds. (4) 2009 Revenue Bonds were fully defeased in June 2016 by the Successor Agency 2016 Series B Tax Allocation Refunding Bonds. (5) Sole source of payment on 2011 Tax Allocation Notes is Available Tax Increment, but is subordinate to any existing or future indebtedness. (6) Gross Tax Increment consist of property taxes generated from Project Area No. 1&1A (7) Operating Expenses consist of the 20% set-aside property taxes generated from Project Area No. 1&1A up until 2011, pass through payments pursuant to agreements to allocate tax increment funds to various Local Agencies, and other charges related to administering Area 1&1A debt.

181 City of Palmdale Former Community Redevelopment Agency - Project Area 2A Pledged-Revenue Coverage Last Ten Fiscal Years

1999 Sublien TAB 2.7 2002 TAB 5.3 2004 TAB 6.09 2004 TAB 18.5 1998 TAB 30.6 1994 Revenue Bonds Fiscal Debt Service (2) Debt Service Debt Service (3) Debt Service (3) Debt Service (2) Debt Service (1) Year Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest

2009 $ 80,000 $ 176,275 - - - $ 275,105 - $ 913,500 $ 500,000 $ 1,429,750 $ 175,000 - 2010 85,000 171,737 - - - 275,105 - 913,500 555,000 1,405,125 180,000 - 2011 90,000 166,925 - - - 275,105 $ 75,000 911,625 585,000 1,376,625 185,000 - 2012 95,000 161,838 - - $ 145,000 272,930 280,000 902,750 615,000 1,346,625 190,000 - 2013 100,000 156,475 - - 145,000 268,508 290,000 888,500 640,000 1,315,250 195,000 - 2014 105,000 150,837 - - 155,000 263,780 300,000 873,750 675,000 1,282,375 205,000 - 2015 110,000 144,925 - - 160,000 258,580 310, 000 858,500 710,000 1,247,750 205,000 - 2016 115,000 70,950 - - 165,000 252,890 320,000 842,750 740,000 1,211,500 215,000 - 2017 - - $ 970,000 ------2018 ------

1997 Revenue Bonds 2016 TAB A&B 73.1 Fiscal Debt Service (1) Debt Service Debt Summary Pledged Revenue

Total Debt Gross Tax Less: Operating Year Principal Interest Total Principal Total Interest Total Principal Total Interest Service Sales Tax (4) Increment (4) Expenses (5) Net Available Coverage

2009 $ 625,000 $ 310,284 - - $ 1,380,000 $ 3,104,914 $ 4,484,914 $ 7,549,500 $ 40,118,147 $ 34,596,140 $ 13,071,507 2.91 2010 655,000 277,316 - - 1,475,000 3,042,783 4,517,783 7,585,792 35,002,630 28,233,627 14,354,795 3.18 2011 690,000 242,001 - - 1,625,000 2,972,281 4,597,281 8,027,506 31,695,731 26,344,253 13,378,984 2.91 2012 730,000 204,098 - - 2,055,000 2,888,241 4,943,241 Note (6) 27,126,295 16,712,555 Note (6) Note (6) 2013 765,000 163,919 - - 2,135,000 2,792,652 4,927,652 Note (6) 29,606,177 21,450,574 Note (6) Note (6) 2014 805,000 120,820 - - 2,245,000 2,691,562 4,936,562 Note (6) 29,406,998 17,777,381 Note (6) Note (6) 2015 850,000 74,480 - - 2,345,000 2,584,235 4,929,235 Note (6) 32,813,662 19,508,055 Note (6) Note (6) 2016 905,000 25,340 - - 2,460,000 2,403,430 4,863,430 Note (6) 34,915,819 20,449,662 Note (6) Note (6) 2017 - - $ 1,235,000 $ 2,611,743 2,205,000 2,611,743 4,816,743 Note (7) 40,469,941 22,224,293 18,245,648 3.79 2018 - - 3,130,000 3,394,850 3,130,000 3,394,850 6,524,850 Note (7) 40,400,227 22,619,322 17,780,905 2.73

Note: Details regarding the City's debt and the Successor Agency to the former Community Redevelopment Agency's debt can be found in the notes to the financial statements.

Note: As the result of the dissolution of the former Community Redevelopment Agency, the debt listed on this schedule has been assumed by the Successor Agency of the Former Community Redevelopment Agency. The debt has been approved by the State Department of Finance as an enforceable obligation and will be paid from future tax revenues received by the Private Purpose Trust Fund. (Note 19) Source: City of Palmdale, Finance Department (1)The 1994 and 1997 Revenue Bonds were fully matured and paid off in FY 2016. (2)The 1998 and 1999 Tax Allocation Bonds were fully defeased in April 2016 by the Successor Agency 2016 Series A Tax Allocation Refunding Bonds. (3)The 2004 $18.5M and 2004 $6.1 Tax Allocation Bonds were fully defeased in June 2016 by the Successor Agency 2016 Series B Tax Allocation Refunding Bonds. (4) Gross sales tax and tax increment consist of property taxes and sales tax generated from Project Area No. 2A.

(5) Operating Expenses consist of the 20% set-aside property taxes generated from Project Area No. 2A up until 2011, pass through payments pursuant to agreements to allocate tax increment funds to various Local Agencies, and other charges related to administering Area 2A debt.

(6) Due to the dissolution of the Community Redevelopment Agency in 2012, the Sales Tax generated by Project Area was not available therefore the "Net Available" and "Coverage" percent is not available. (7) Due to the FY 2016 refunding of bond issues with a sales tax pledge, there is no longer any pledge of sales tax towards any Successor Agency debt.

182 City of Palmdale Former Community Redevelopment Agency - Project Area 2A (20% Set Aside) Pledged-Revenue Coverage Last Ten Fiscal Years

2003 TAB 5.9 2003 TAB 7.2 2005 TAB 14.115 2005 TAB 2.8 Fiscal Debt Service (1) Debt Service (1) Debt Service (1) Debt Service (1) Year Principal Interest Principal Interest Principal Interest Principal Interest

2008 $ 165,000 $ 222,560 $ 25,000 $ 346,345 $ 410,000 $ 557,741 30,000$ 119,715$ 2009 170,000 218,785 25,000 345,798 420,000 545,291 30,000 118,815 2010 165,000 214,185 25,000 345,157 445,000 532,316 25,000 117,990 2011 170,000 209,160 25,000 344,423 455,000 515,404 35,000 117,073 2012 175,000 203,985 30,000 343,545 475,000 494,479 35,000 115,961 2013 175,000 198,516 30,000 342,428 500,000 472,541 35,000 114,802 2014 180,000 192,523 30,000 341,168 525,000 452,104 35,000 113,599 2015 180,000 186,043 35,000 339,803 550,000 430,541 35,000 112,356 2016 190,000 179,103 35,000 338,333 570,000 407,479 40,000 110,976 2017 ------2018 ------

Debt Summary Pledged Revenue 20% Set Aside Fiscal Total Total Debt Tax Increment Year Principal Total Interest Service (2) Net Available Coverage

2008 $ 630,000 $ 1,246,361 $ 1,876,361 $ 7,649,438 $ 7,649,438 4.08 2009 645,000 1,228,689 1,873,689 8,023,630 8,023,630 4.28 2010 660,000 1,209,648 1,869,648 7,000,526 7,000,526 3.74 2011 685,000 1,186,060 1,871,060 6,339,147 6,339,147 3.39 2012 715,000 1,157,970 1,872,970 5,425,259 5,425,259 2.90 2013 740,000 1,128,287 1,868,287 5,921,235 5,921,235 3.17 2014 770,000 1,099,394 1,869,394 5,881,400 5,881,400 3.15 2015 800,000 1,068,743 1,868,743 6,562,732 6,562,732 3.51 2016 835,000 1,035,891 1,870,891 6,983,164 6,983,164 3.73 2017 ------2018 ------

Note: Details regarding the City's debt and the Successor Agency to the former Community Redevelopment Agency's debt can be found in the notes to the financial statements Note: As the result of the dissolution of the former Community Redevelopment Agency, the debt listed on this schedule has been assumed by the Successor Agency of the Former Community Redevelopment Agency. The debt has been approved by the State Department of Finance as an enforceable obligation and will be paid from future tax revenues received by the Private Purpose Trust Fund. (Note 19) Source: City of Palmdale, Finance Department

(1)The 2003 Series C & D TAB's and the 2005 Series E & F TAB's were fully defeased in April 2016 by the Successor Agency 2016 Series B TAB's. (2)The pledged revenues represent 20% property tax increments generated from Project Area 2A and set aside as required by State law for low and moderate income housing. (2) Due to the dissolution of the Community Redevelopment Agency during 2012, the 20% set aside is no longer required. The 20% set aside calculated is based on what it should have been if legally required.

183 City of Palmdale Demographic and Economic Statistics Last Ten Fiscal Years

(2) (2) Personal Per (5) Income Capita (2) (3) (4) (5) % of Pop 25+ Calendar (1) (thousands Personal Median School Unemployment % of Pop 25+ with Bachelor's Year Population of dollars) Income Age Enrollment Rate with HS Degree Degree

2008 145,973 $ 3,137,576 $ 21,494 28.30 44,025 9.3% 2009 150,782 3,141,641 20,836 29.00 43,208 14.4% 79.8% 16.4% 2010 152,622 2,665,238 17,463 28.40 39,737 15.6% 73.3% 14.6% 2011 153,708 2,837,296 18,459 29.00 31,915 15.2% 73.4% 15.2% 2012 154,535 2,859,670 18,505 28.90 31,372 11.6% 74.1% 15.4% 2013 154,629 2,890,789 18,695 28.70 31,226 10.8% 73.0% 14.7% 2014 155,734 2,892,448 18,573 29.10 35,356 11.0% 74.2% 15.3% 2015 160,072 3,028,678 18,920 29.30 34,932 9.0% 73.6% 15.5% 2016 158,605 3,010,803 18,983 30.10 33,874 7.1% 74.2% 14.8% 2017 158,905 3,121,978 19,646 30.40 36,785 6.2% 74.0% 15.0%

Source: (1) California State Department of Finance, Demographic Research Unit E-1: City/County Population Estimates (2) 2004-2013 Income, Age, and Education Data: ESRA - Demographic Estimates are based on the last available Census. Projections are developed by incorporating all of the prior census data released to date. Demographic Data is totaled from Census Block Groups that overlap the City's Boundaries. U.S. Census Bureau, most recent American Community Survey. 2010, and later - Income, Age and Education Data - US Census Bureau, most recent American Community Survey.

(3) Palmdale School District, California Department of Education

(4) California Employment Development Department. (5) U.S. Census Bureau

184 City of Palmdale Principal Employers - Antelope Valley Current Year and Nine Years Ago (Unaudited)

2017 2008 Percentage of Percentage of Number of Total Valley Number of Total Valley Employer Employees Employment Employer Employees Employment

Edwards Air Force Base 11,457 2.11% Edwards Air Force Base 12,800 4.03%

China Lake NWC 6,520 1.20% China Lake NWC 6,580 2.07%

Northrop Grumman 4,200 0.77% Lockheed Martin 3,700 1.17%

County of Los Angeles 4,136 0.76% County of Los Angeles 3,546 1.12%

Lockheed Martin 3,700 0.68% Antelope Valley Hospital 2,370 0.75%

Antelope Valley Hospital Medical Center 2,500 0.46% A.V. High School District 2,232 0.70%

Antelope Valley Union High School District 2,500 0.46% Northrop-Grumman 2,100 0.66%

Lancaster School District 2,200 0.41% Wal-Mart (4 stores) 2,070 0.65%

Wal-Mart (5) stores 1,922 0.35% Tehachapi State Prison 1,800 0.57%

Antelope Valley Mall (All Stores) 1,800 0.33% Antelope Valley Mall 1,800 0.57%

Source: City of Palmdale Economic Development Department 2017 GAVEA Report

Note 1: FY2017 represents employment reported for calendar year 2016 and the most recent year available. Calendar year 2017 will not be available until January 2018.

Note 2: "Total Employment" as used above represents the total employment located within the Greater Antelope Valley region. The Antelope Valley region is considered to be the City's economic region and covers 3,514.2 square miles of area and includes the City of Palmdale, Lancaster, Tehachapi and Ridgecrest. The principal employers represent all employers within the greater Antelope Valley region.

Note 3: 2008 total employment used to calculate the percentage of principal employers is an estimate. The estimate is based on the ratio of the 2008 employment to total population and then applied to total population reported for the calendar year 2008.

185 City of Palmdale Full-time-Equivalent City Government Employees by Function:Program Last Ten Fiscal Years

Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CITY MANAGER 9.00 8.00 8.00 5.00 5.00 7.00 5.00 6.00 8.00 8.00

CITY ATTORNEY 5.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00

ADMINISTRATIVE SERVICES 25.00 18.00 18.00 18.00 18.00 17.00 20.00 20.00 21.00 21.00

ECONOMIC & COMMUNITY DEVELOPMENT* 44.00 34.00 34.00 38.00 35.00 33.00 39.00 25.00 27.00 29.00

NEIGHBORHOOD SERVICES 31.00 26.00 26.00 21.00 19.00 24.00 21.00 20.00 21.00 24.00

PUBLIC WORKS* 106.00 91.00 91.00 87.00 89.00 83.00 81.00 97.00 103.00 110.00

RECREATION & CULTURE 32.00 22.00 22.00 20.00 14.00 13.00 14.00 14.00 14.00 16.00

Total 252.00 203.00 203.00 193.00 184.00 181.00 184.00 186.00 198.00 212.00

CITY OF PALMDALE - FULL TIME EMPLOYEES Last Ten Fiscal Years

300

250

200

150

100

50

0 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18

Fiscal Year

*2016 Fluctuation in full time employees was caused by a reoganization.

Source: City of Palmdale, Finance Department

186 City of Palmdale Operating Indicators by Function/Program Last Ten Fiscal Years

Function/Program 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Communications Television programs produced 69 27 46 25 18 7 10 16 12 21 Commercials produced 6 17 13 4 2 4 5 7 8 7 Still Photo Shoots - - - - - 2 24 39 33 39 Newsletters published - hard copies 3 3 3 3 3 3 3 3 3 3 Newsletters published - external e-newsletters - - - - - 51 80 91 91 140 Newsletters published - internal e-newsletters ------22 57 18 48 Economic and Community Development Film permits issued 17 35 20 21 22 15 19 36 35 29 Businesses licensed 6,307 4,357 4,841 6,290 4,973 6,240 8,873 9,585 10,099 9,929 Building permits issued 838 790 814 851 862 1,168 1,517 1,814 1,742 1,566 Engineer grading permits issued 10 10 17 14 9 23 17 22 26 18 Engineer Geotechnical review 19 14 20 10 16 18 10 20 12 12 Engineer Improvement plans 58 34 71 91 74 80 70 139 166 194 Engineer Inspections 5,706 1,600 3,005 2,667 1,921 2,189 3,200 2,219 965 1,101 Financial assistance to businesses 4 3 1 ------SBDC business counseling hours 350 273 232 278 275 275 275 206 374 286

187 Business retention site visits 20 15 34 35 32 32 35 34 36 35 General Government Buildings maintained 41 41 41 40 40 48 57 64 65 57 Square footage of facilities 415,089 382,000 396,127 387,300 387,300 312,600 415,830 424,488 418,000 418,000 Neighborhood Services Neighborhood watch presentations 169 122 122 93 172 115 118 66 86 88 Business watch presentations 23 16 10 12 56 36 11 52 57 63 PAC presentations ` 37 28 18 23 62 11 25 8 11 Administration Citations Processed 424 576 744 535 768 641 741 361 818 630 Parking Enforcement Vehicle Impounds 391 400 400 292 410 330 205 500 483 462 Citations Issued 8,040 6,651 6,601 7,416 8,648 5,585 5,195 3,560 5,430 7,233 Calls for Service 1,029 835 772 696 719 757 1,086 2,837 9,346 2,007 Number of law violations: Part 1 crimes 4,721 4,445 4,201 4,087 4,305 4,093 4,750 4,200 5,946 4,082 Part 2 crimes 7,337 7,053 7,011 6,589 5,787 7,775 6,614 4,835 10,743 7,876 Crime reports taken 19,146 18,562 17,716 16,605 - 20,612 19,254 15,630 16,689 11,958 Arrests 11,629 10,486 9,497 9,901 7,435 5,267 6,206 5,976 9,061 6,583 Accident reports taken 1,753 1,424 1,303 1,385 1,278 1,572 1,967 2,081 2,226 1,435 Animal licenses issued 11,576 7,240 9,642 9,375 8,504 8,314 8,318 9,643 11,416 11,616 Code Enforcement cases closed 5,892 4,373 4,057 4,016 3,254 3,421 3,835 4,190 4,607 4,390 Mobile Home Parks paid occupied spaces 787 787 787 787 787 787 787 787 787 787 Affordable Housing - Apartment Units 4 ------291 291 291 City of Palmdale Operating Indicators by Function/Program Last Ten Fiscal Years

Function/Program 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Health and Welfare Family members assisted with food and/or shelter 3,910 3,130 3,157 3,370 5,561 10,281 7,184 7,516 6,573 9,143 SAVES meals provided 74,117 99,876 92,547 87,507 86,037 575,085 361,956 94,170 94,595 118,321 SAVES motel vouchers provided (night) 647 565 433 188 19 25 29 59 160 101

Public Services Number of landscape districts maintained 228 245 245 245 245 245 248 230 230 230 Landscaped area (acres) maintained 130 130 253 253 253 253 253 376 377 377 Irrigation controllers maintained 393 542 542 542 542 542 542 532 413 413 Landscape median area maintained (sq. ft.) 983,767 983,767 2,500,344 2,500,344 2,500,344 2,500,344 2,500,344 2,500,344 2,553,144 2,553,144 SR 14 Interchange area maintained (sq. ft.) 125,382 125,382 125,382 125,382 125,382 125,382 125,382 125,382 125,382 125,382 Park-n-ride spaces maintained 2,009 2,009 2,009 2,009 2,009 2,009 2,009 2,009 2,009 2,009 Park-n-ride Acres Maintaned 22 22 22 22 22 22 22 22 22 22 Park-n-ride security hours provided 15,240 15,240 15,240 15,240 ------Detention basins maintained 265 226 226 226 226 226 226 267 267 267 Detention basins (acres) maintained 120 90 207 94 94 94 94 110 110 110 Service requests - landscape maint. 300 429 234 252 215 365 1,109 1,236 1,016 1,016 Vandalism repair hours 825 0 663 126 200 3,246 20 23 13 13 188 Graffiti abatement hours 6,441 5,362 4,260 5,150 4, 775 - 1,211 4,720 1,204 1,210 Lighting districts 148 148 149 149 171 150 164 164 164 164 Number of street lights in districts 3,400 3,400 4,100 4,100 18,692 18,437 18,513 18,515 18,515 18,515 Commercial acreage in street lighting districts 460 296 600 600 625 625 2,090 2,111 2,111 2,111 Residential parcels in street lighting districts 6,600 6,200 8,000 8,000 37,038 40,730 40,770 40,785 40,785 40,792 Striping and marking sq. ft. 78,767 1,637,856 237,822 1,900,000 1, 068,911 2,500,000 2,500,000 2,500,000 1,713,453 2,500,000 Trees planted 36 0 263 500 130 320 45 100 75 Street trees pruned 2,200 1,662 1,034 1,200 980 947 410 455 455 1,678 Street signs maintained 8,524 1,332 1,095 8,650 8,650 9,100 9,100 9,150 14,500 14,500 Street centerline miles 555 518 518 518 518 504 504 504 508 508 Street curb miles swept 26,400 26,400 26,400 26,400 26,400 - - - - - Street pavement area (acres) 2,525 2,109 2,109 2,109 2,109 2,109 2,109 2,109 2,172 2,172 Bridges maintained 9 9 9 9 9 9 9 9 9 9 Box culverts maintained 6 6 6 6 6 7 7 7 7 7 Number of passengers served 3 3,165,000 3,062,088 2,863,691 3,283,438 3,493,239 3,641,482 3, 500,593 3, 462,497 2,534,682 2,442,282 Number of commuter and fixed routes 3 16 15 16 18 18 18 18 18 18 19

Cultural and Recreational Library circulation* 422,429 247,579 341,581 329,022 332,010 318,006 284,027 263,750 315,639 198,361 Library volumes owned* 134,184 71,726 72,101 69,805 89,210 N/A N/A 73,045 73,612 78,073 Library programs* 613 36 48 79 139 233 190 271 339 428 Playhouse general attendance 1 23,539 15,850 5,220 6,642 8,735 N/A N/A N/A 8,900 10,800 Larry Chimbole Center attendance 109,000 99,000 59,795 61,099 57,850 - 75,000 80,000 80,000 80,120 Legacy Commons Attendance 68,900 62,206 36,400 36,000 36,000 36,000 37,000 40,000 55,875 55,900 City of Palmdale Operating Indicators by Function/Program Last Ten Fiscal Years

Function/Program 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Hammack Community Activity Center attendance 10,000 - - - - N/A N/A N/A N/A N/A Oasis Park Recreation Center attendance 1 34,400 12,140 12,062 9,013 11,000 N/A N/A N/A 47,000 47,000 Amphitheater attendance 1 57,000 9,800 49,800 33,150 25,800 N/A N/A N/A 47,500 50,800 Day Camp participants 1,200 950 987 920 920 N/A N/A N/A N/A N/A After school participants 1 11,100 8,406 9,467 11,175 11,000 N/A N/A N/A 7,220 N/A Tiny Tot Participants 1 11,500 359 1,637 1,633 1,630 N/A N/A N/A N/A N/A Park and skatepark patrons 433,000 378,938 - - - N/A N/A N/A N/A N/A Recreational swimming attendance 1 33,971 36,502 15,051 9,165 3,330 N/A N/A N/A 2,450 2,500 Lesson swimming attendance 1 19,386 15,372 15,931 15,883 16,802 N/A N/A N/A 2,680 2,587 Youth sports participants 157,545 150,680 168,189 167,527 16,000 1,700 1,661 1,784 1,664 1,586 Adult sports participants 133,052 131,142 122,377 125,525 119,136 2,500 2,446 2,530 2,574 2,560 General Program Registrants 2 - - - - - 7,193 13,701 11,328 11,510 11,264 Aquatic Program Registrants 2 - - - - - 8,934 8,378 2,833 2,910 2,999 Facility Rental Bookings 2 - - - - - 2,259 4,819 2,600 4,452 925 Airpark Attendance 2 - - - - - 11,874 16,918 17,100 16,336 17,000 Airpark Guided Tours 2 - - - - - 258 51 60 22 30 Community Event Attendance 2 - - - - - 64,750 43,000 44,000 44,000 44,000 Playhouse Performance Attendance 2 - - q - - - 5,155 10,125 9,416 13,345 15,230 189 DryTown Admissions 2 - - - - - 81,000 85,000 91,400 92,000 92,000 Tournament Attendance 2 - - - - - 50,000 46,500 47,320 58,032 65,000

*Source: City of Palmdale, various City departments Note 1 Reported under new function/program for FY 2013-14 2 Began reporting in FY 2013-14 3 Figures provided by Antelope Valley Transit Authority 4 Four multifamily apartment buildings purchased in September 2015 City of Palmdale Capital Asset Statistics by Function/Program Last Ten Fiscal Years

Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

General Government Number of City owned building facilities 45 47 47 47 47 47 47 55 55 55 City Vehicles 4 4 4 4 4 4 4 4 4 4

Public Safety Vehicles 8 8 8 8 8 8 8 12 12 16

Public Services Streets and Bikeways (miles) 555 560 580 580 580 580 580 580 580 580 Landscaped area (acres) 130 253 260 260 260 260 260 260 260 260 Park-n-ride 22 22 22 22 22 22 22 22 22 22 Storm drainage systems (feet) 92,300 92,300 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 Retention and detention basins 11 11 11 11 11 11 11 11 11 11 Storm drainage pump stations 3 3 3 3 3 3 3 3 3 3 Detention basins (acres) 120 207 207 207 207 207 207 207 207 207 Traffic signals 164 - 166 166 168 168 168 184 188 195 Traffic signs 8,675 - 8,700 8,700 8,700 8,700 8,700 8,700 8,750 8,750 Transportation Center 1 1 1 1 1 1 1 1 1 1 Bridges 9 9 9 9 9 9 9 9 9 9 Street Lights1 3,400 4,100 4,150 4,150 4,200 4,200 4,200 4,200 4,20 0 18,523 Vehicles 78 81 75 75 75 75 75 91 91 104

Community Development Mobile Home Parks 3 3 3 3 3 3 3 3 3 3

Cultural and Recreational Number of Parks 21 21 21 21 21 21 21 21 22 22 Developed park acreage 576 576 576 576 576 576 576 576 588 362 Number of swimming pools 4 4 4 4 4 3 3 3 3 3 Number of tennis courts 9 9 9 9 9 9 9 10 10 10 Number of Libraries 2 2 1 1 1 1 1 1 1 1 Number of Community Centers 4 4 4 4 3 3 3 3 3 3 Skate Parks 2 2 2 2 2 2 2 2 2 2 Soccer Fields 27 27 27 27 27 27 27 29 30 30 Basketball courts 8 8 8 8 8 8 8 9 9 9 Softball diamonds 20 20 20 20 20 20 20 13 13 13 Volleyball courts 6 6 6 6 6 6 6 7 7 7 Little league fields 11 11 11 11 11 11 11 11 11 11 Roller Hockey rinks 2 2 2 2 2 2 2 2 2 2 Aquatics Facility - Water Park 1 1 1 1 1 1 1 1 1 1 Community Theatre 1 1 1 1 1 1 1 1 1 1 Amphitheatre 1 1 1 1 1 1 1 1 1 1 Vehicles 7 7 7 7 3 4 4 6 6 5

Health and Welfare Vehicles 2 2 2 2 2 2 2 2 2 2

Source: City of Palmdale, various City departments

1 - The City of Palmdale obtained jursidiction of 14,315 Los Angeles County street lights in 2013; currently in the process of acquisition of street lights.

190

Other

Information

CITY OF PALMDALE, CALIFORNIA

Year Ended June 30, 2018

THIS PAGE INTENTIONALLY LEFT BLANK

City of Palmdale Other Information to the Financial Statements For the Year Ended June 30, 2018

The former Community Redevelopment Agency of the City of Palmdale ceased to exist as of January 31, 2012, as the result of the statewide dissolution of redevelopment, per AB1X26. The following debt is related to debt of the newly formed Successor Agency of the former Community Redevelopment Agency and is not debt of the City.

A. The Successor Agency for the Former Community Redevelopment Agency of the City of Palmdale

The Successor Agency for the former Community Redevelopment Agency (CRA) was created on January 4, 2012 when the City Council elected to become the Successor Agency for the former Redevelopment Agency of the City of Palmdale in accordance with Assembly Bill (ABx 1 26 and 1484). The Successor Agency of the former CRA was formed for the purpose of holding the assets of the former CRA until they are distributed to other units of state and local government. The Successor Agency of the former CRA is subject to the control of an oversight board and remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution. The assets and activities are reported as a private purpose trust fund and its debts and obligations are not debts or obligations of the City.

B. Successor Agency Long-Term Debt

1) Notes Payable

Fairway Business Park Note Payable - The former Community Redevelopment Agency (CRA) issued a Promissory Note for the purchase of 120 acres of industrial property known as the Fairway Business Park. On May 16, 2007, the former CRA approved a Settlement Agreement and Mutual General Release, which provided for the former CRA to pay a settlement amount of $23,043,000 for the property and $4,975,309 for accrued, unpaid interest. On September 1, 2010, the former Community Redevelopment Agency of the City of Palmdale issued $11,001,339 of 2010 Series A Tax Allocation Refunding Revenue Notes (2010 Series A Notes) and $16,504,000 of 2010 Series B Tax Allocation Refunding Revenue Notes (2010 Series B Notes). The net proceeds of the 2010 Series A & B Tax Allocation Refunding Revenue Notes were used to refinance the former Community Redevelopment Agency’s outstanding Fairway Business Park note payable.

The principal and interest on the Notes are payable from pledged tax increment from the former Redevelopment Project Area No. 1. Interest on the notes is payable semi-annually on March 1 and September 1, beginning March 1, 2011. Principal installments are payable September 1 and March 1 of each year from 2011 through 2026. The 2010 Series A Notes bear a fixed interest rate of 5.97% per annum and the 2010 Series B Notes bear a fixed interest rate of 6.2% per annum.

Upon dissolution of the former Community Redevelopment Agency, the Note Payable were an approved enforceable obligation by the State Department of Finance, therefore beginning February 1, 2012, the pledge and payments will be made from future property tax revenues received by the Private Purpose Trust. The current year payments of principal and interest were $2,750,660. The outstanding balance of the notes as of June 30, 2018 is $17,485,479.

Year Ending Principal Interest Total 2019 $ 1,715,292 $ 1,035,369 $ 2,750,661 2020 1,822,825 927,836 2,750,661 2021 1,937,100 813,560 2,750,660 2022 2,058,542 692,118 2,750,660 2023 2,187,598 563,063 2,750,661 2024-2026 7,764,122 857,680 8,621,802

Totals $ 17,485,479 $ 4,889,625 $ 22,375,104

191 City of Palmdale Other Information to the Financial Statements For the Year Ended June 30, 2018

Dillard’s Infrastructure Note Payable - The former Community Redevelopment Agency entered into a Third Implementation Agreement to a Disposition and Development Agreement to reimburse the developer for improvements relating to the construction of a Dillard’s department store. The agreement provides for a maximum reimbursement of $1,851,038 to Dillard’s for costs of the public infrastructure improvements necessary for the site. The former Community Redevelopment Agency has pledged a percent of sales tax revenues generated from Dillard’s department store to repay the Note. The amount to be reimbursed quarterly is based upon 50 percent of the sales tax revenue actually received by the former Community Redevelopment Agency, generated by the sales occurring at the Dillard’s department store as reported by the latest quarterly report. Reimbursement payments are due 30 days after the former Community Redevelopment Agency receives notice stating the amount of sales tax revenue generated by sales occurring during such calendar quarter.

Upon dissolution of the former Community Redevelopment Agency, the Note Payable were an approved enforceable obligation by the State Department of Finance, therefore beginning February 1, 2012, the pledge and payments will be made from future property tax revenues received by the Private Purpose Trust. The reimbursement payment made from the current year was $74,227, and the balance remaining to be paid from pledged future revenues total $167,139 as of June 30, 2018.

2) Tax Allocation Bonds

2002 Tax Allocation Bonds Payable ($5,329,748) - On August 20, 2002, the former Community Redevelopment Agency issued $5,329,748 of 2002 Subordinate Lien Tax Allocation Bonds (2002 Bonds). The 2002 Bonds constitute capital appreciation bonds that are not subject to redemption prior to their respective stated maturities. Interest on the 2002 Bonds compound at rates ranging from 4.88% to 5.68% per annum on June 1 and December 1, commencing December 1, 2002, and will be payable solely at maturity or upon earlier redemption of the respective Bonds. The Bonds will mature and be payable December 1 of each year from 2016 through 2032.

The former Community Redevelopment Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund. (Note 19)

The proceeds of the 2002 Bonds were used to finance redevelopment activities in or of benefit to Project Area No. 2A. The former Community Redevelopment Agency has pledged incremental property tax generated in Project Area No. 2A to pay principal and interest with respect to the 2002 Bonds as they become due. The current year payment of principal was $965,000. No interest was paid for the current year. Property taxes received totaled $17,780,905 for the year. At year-end, pledged future revenues totaled $15,320,000 of which $10,311,788 was the amount of the remaining principal and $5,008,262 interest on the Bonds.

Year Ending Principal Interest Total

2019 $ 949,836 $ 20,164 $ 970,000 2020 897,465 67,535 965,000 2021 855,126 114,874 970,000 2022 805,633 159,367 965,000 2023 764,870 205,130 970,000 2024-2028 3,242,705 1,617,295 4,860,000 2029-2033 2,796,103 2,823,897 5,620,000

Totals $ 10,311,738 $ 5,008,262 $ 15,320,000

192 City of Palmdale Other Information to the Financial Statements For the Year Ended June 30, 2018

2016 Tax Allocation Bonds Payable ($31,490,000) - On April 26, 2016, the Successor Agency issued $31,490,000 of 2016 Series A Tax Allocation Refunding Bonds (2016 Series A Bonds). Interest on the 2016 Series A Bonds is payable semi-annually on March 1 and September 1 at rates ranging from 2.00% to 5.00% per annum. Principal installments are payable September 1 of each year to 2034.

The 2016 Series A Bonds maturing on or after September 1, 2027, may be redeemed on or after September 1, 2026, at par together with accrued interest, without premium.

The Successor Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund.

The Successor Agency has pledged incremental property tax generated in the Successor Agency’s project areas to pay principal and interest on the 2016 Series A Bonds. No principal or interest was paid for the current year. Property taxes received totaled $27,614,561 for the year. At year- end, pledged future revenues totaled $40,380,825 of which $28,720,000 was the amount of the remaining principal and $11,660,825 interest on the Bonds.

Year Ending Principal Interest Total 2019 $ 1,585,000 $ 1,388,450 $ 2,973,450 2020 1,645,000 1,315,625 2,960,625 2021 1,730,000 1,231,250 2,961,250 2022 1,810,000 1,142,750 2,952,750 2023 1,910,000 1,049,750 2,959,750 2024-2028 9,885,000 3,715,125 13,600,125 2029-2033 7,065,000 1,661,375 8,726,375 2034-2035 3,090,000 156,500 3,246,500

Totals $ 28,720,000 $ 11,660,825 $ 40,380,825

2016 Tax Allocation Bonds Payable ($41,645,000) - On June 23, 2016, the Successor Agency issued $41,645,000 of 2016 Series B Tax Allocation Refunding Bonds (2016 Series B Bonds). Interest on the 2016 Series B Bonds is payable semi-annually on March 1 and September 1 at rates ranging from 3.00% to 5.00% per annum. Principal installments are payable September 1 of each year to 2034.

The 2016 Series B Bonds maturing on or after September 1, 2027, may be redeemed on or after September 1, 2026, at par together with accrued interest, without premium.

The Successor Agency has reported the debt in the Private Purpose Trust Fund and is an approved enforceable obligation by the State Department of Finance and will be repaid from future property tax revenues allocated to the Private Purpose Trust Fund.

The Successor Agency has pledged incremental property tax generated in the Successor Agency’s project areas to pay principal and interest on the 2016 Series B Bonds. The current year

193 City of Palmdale Other Information to the Financial Statements For the Year Ended June 30, 2018 payments of principal and interest were $3,546,675. Property taxes received totaled $27,614,561 for the year. At year-end, pledged future revenues totaled $57,530,625 of which $40,050,000 was the amount of the remaining principal and $17,480,625 interest on the Bonds.

Year Ending Principal Interest Total

2019 $ 1,665,000 $ 1,894,450 $ 3,559,450 2020 1,720,000 1,818,150 3,538,150 2021 1,810,000 1,729,900 3,539,900 2022 1,915,000 1,636,775 3,551,775 2023 2,005,000 1,538,775 3,543,775 2024-2028 13,220,000 6,000,750 19,220,750 2029-2033 12,435,000 2,640,125 15,075,125 2034-2035 5,280,000 221,700 5,501,700

Totals $ 40,050,000 $ 17,480,625 $ 57,530,625

194 Important dates in Palmdale and Antelope Valley History

From left: DryTown Water Park opens in 2006; Palmdale serves as a start city for the Amgen Tour of California in 2009, 2010 and 2012; Carmax opens a refurbishment center and dealership in February 2017, bringing hundreds of new jobs. 1987 Palmdale is named the fastest- new Palmdale Amphitheater, which opened between the City and Palmdale Water growing city in California. on July 16 with a concert by Tracy Lawrence. District. Irrigation with recycled water begins 1988 Palmdale voters elect Pete Knight 2006 Palmdale wins the Princess Trophy for at McAdam Park. mayor directly. Previously, the city council its first entry in the Rose Parade. 2014 The ‘Miracle Mile’ in East Palmdale choose one of its own to serve as mayor. The $23.9 million Palmdale Sheriff’s Station sees continued growth with additions of 1990 The area’s first regional shopping opens. In-Shape Gym, Ni Hao Sushi, Panera Bread center, the Antelope Valley Mall, opens. and Sweet Frog. Dick’s Sporting Goods and DryTown Water Park opens. H&M open at the Antelope Valley Mall. The Starlight Concert series begins. 2007 Plans are unveiled for a power plant. 2015 Palmdale is named “Most Business 1991 The Antelope Valley Auto Center NASA Dryden Flight Research Center opens Friendly City” by Los Angeles Economic opens. a satellite aircraft operations facility at USAF Development Corporation (LAEDC). 1994 The Palmdale Playhouse opens. Plant 42, Site 9. Kinkisharyo begins to assemble and 1996 Lockheed Martin Skunk Works, Palmdale launches a new anti-crime manufacture light rail cars for Metro, creating located at Air Force Plant 42, is awarded program, Partners for a Better Palmdale. nearly 250 jobs. the contract to design and build the next 2008 Claim Jumper, Souplantation, Buffalo Retail booms with the arrival of The generation of the space shuttle — the X-33. Wild Wings, and Fire Island Grill restaurants Habit, Pizza Rev, Yogurtland and Walmart 1998 Palmdale Youth Library opens. open. Neighborhood Market. 2000 Barnes & Noble opens near Target, 2009 Palmdale becomes a Charter City. Palmdale’s first mayor, Larry Chimbole, Lowe’s and Best Buy on 10th St. West. The Palmdale City Library consolidates its passes away at the age of 96. A bronze statue 2001 Thursday Night on the Square, a Main and Youth libraries. of Chimbole can be viewed at the Chimbole popular weekly summer event at Poncitlán Cultural Center. 2010 Embassy Suites and Palmdale Square in downtown Palmdale, begins. Business growth continues with the Regional Medical Center open in Palmdale; 2016 arrival of Bang Printing, Blaze Pizza, Krispy 2002 Palmdale Plant 42 Heritage Airpark, Macy’s opens in the AV Mall. later renamed Joe Davies Heritage Airpark at Kreme, Chick-fil-A, Aldi, Five Guys and Café Palmdale Plant 42, opens to the public. Palmdale serves as Host City for Stage 6 of Rio. Two local craft breweries — Transplants the Amgen Tour of California — the most and Lucky Luke — open. 2003 Trader Joe’s, Bed Bath & Beyond, difficult leg of the race, 135.3 miles from Panera Bread, PetSmart and T.J. Maxx open. Palmdale holds its first election by district. Palmdale to Big Bear Lake. Palmdale Mayor James C. Ledford is elected Home sales begin in the Anaverde 2004 2011 Yard House restaurant opens. to an unprecedented 12th term as mayor. Master Planned Community. Legacy Commons for Active Seniors CarMax opens a new showroom and The $15 million Palmdale 2017 2005 celebrates its 1 year anniversary with a refurbishment facility. Dog Haus and Rockin’ Transportation Center opens, providing a dedication ceremony. Jump open at the AV Mall. state-of-the-art transportation facility. The regional multimodal hub offers connections 2012 Palmdale serves as Host City for Stage 2018 Palmdale’s crime rate plummets between AVTA local and commuter bus 6 of the Amgen Tour of California — again to 201, lowest in decades. Home Goods, service, Metrolink commuter rail service, from Palmdale to Big Bear Lake. Turner’s Outdoorsman, Element Hotel and Santa Clarita Transit, Greyhound bus service Palmdale celebrates its 50th birthday. Home2 Suites open. and Amtrak Throughway bus service. 2013 The formation of Palmdale Recycled The Starlight Concert Series moves to the Water Authority is announced, a partnership 38300 Sierra Highway, Palmdale, California 93550 661/267-5100 • www.cityofpalmdale.org